Monday, July 25, 2011

Efficiency, resilience, and ethics.

John Michael Greer has an important post about systems in general, focusing on efficiency and how efficiency is achieved at the cost of resilience. Please read it; JMG and the commenters have many important things to say.

Myself, I diverge from the conclusion that JMG makes. I find that efficiency is the quality of a system that measures how much output is produced from a given amount of input, based on the primary inputs and outputs of a system. Resilience, to me, is how much change there is in the expected output from inputs that are not the designed input.

Take a rain gauge, and a one inch rain fall. A very efficient rain gauge will report that 1.000 inches of rain fell. A resilient rain gauge will report the same thing, regardless of the presence of dust, bugs, sunlight or clouds, or street work three blocks away.

Efficiency, then, and resilience can both be engineered into a system, with only modest compromises. A well engineered system, either through adjustments and corrections over extended use or by good design, might well have both good efficiency and good resilience.

What JMG, and others, look at, is skewed engineering. That is, emphasizing efficiency while ignoring, or actively degrading, resilience. Few people want a car that gets great fuel efficiency if it means the thing falls over when you turn a corner (one of the examples JMG uses). That is a focus on efficiency without attending resilience. Making a car that won't pollute California, on the other hand, resulted in too many vehicles that were massively inefficient in use of fuel, but very efficient at passing California screening standards (that should not have been a primary output of the design).

So, today I read about Seth Godin's comments on happy and unhappy versions of business ethics.

The happy theory of business ethics is this: do the right thing and you will also maximize your long-term profit.

After all, the thinking goes, doing the right thing builds your brand, burnishes your reputation, helps you attract better staff and gives back to the community, the very community that will in turn buy from you. Do all of that and of course you'll make more money. Problem solved.

The unhappy theory of business ethics is this: you have a fiduciary responsibility to maximize profit. Period. To do anything other than that is to cheat your investors. And in a competitive world, you don't have much wiggle room here.

If you would like to believe in business ethics, the unhappy theory is a huge problem.

I see a direct example of efficiency and resilience. In the "happy" theory, the focus is on resilience, on making changes and unexpected inputs to the system (the company) simple noise, and not impacting the ability to do business. In the "unhappy" theory, resilience is deliberately avoided as the sole engineering paradigm is focused on the "efficiency" of making a profit, and avoiding loss.

And I think that Seth and JMG both overlook the obvious.

That is, a resilient design, with good efficiency, is necessary. Spend to much effort on resilience, on effects on the system that don't pay off in supporting the designed output, and you waste resources and opportunities. Any system that fails to produce enough output will fail or be abandoned, so efficiency at some level is needed for survival of the system.

I look at a system differently. The health of the system might describe the ability to survive and perform in the presence of unexpected occurrences, and be described as resilience. Production would be the output of the system, and be described by the limits to how much can be produced, and by the efficiency of using inputs to produce a given output. Basal needs would describe inputs needed for the health and operation of the system that don't directly result in primary output production.

And I think that the definitions of efficiency and resilience are two different axes on a graph, and not opposite ends of a continuous spectrum. The better the design or engineering, the more each is maximized.

For Seth, the happy theory is useless to an organization that doesn't know how to do business. The unhappy theory makes an unwarranted assumption that ruthless operation is necessarily a successful business tactic; it can and often is a more rapid path to dissolution.

Thursday, July 7, 2011

About the myth of "buy American"

I got an email, from someone that believes the union line that we have to "buy American" when they really mean "buy Union" so that unions can do what they do with more money.

> 618
> We don't need government intervention to save ourselves as a country.
> We need a movement. A unified movement for the people, by the people.
> As members of the greatest nation, we owe it to ourselves and the rest of
> the world to protect and strengthen our economy. With the greatest "buying
> power" of any nation, all that is needed for a national resurrection is
> for us to give the power back to ourselves. Support Made In the U.S.A.
> Support yourself. Support US, so that we may continue supporting others.
> Before your next purchase go to to search for an
> American manufacturer of that product.

Ultimately, American economic affluence has been built on debt, and only indirectly on spending.

The problem today at the national level is that fewer families have nearly as much money to spend, and major assets like homes have significantly less value to use as collateral. The result is that fewer people have the means or confidence to service as much debt as previously.

Revolving credit accounts (credit cards) are being paid off more than in recent times, so that the total consumer debt is shrinking. Too many people cannot pay, and their accounts are being closed and taken as losses. That means that credit brokers and speculators have a shrinking mass of debt to manage, to package and sell, and to trade amongst themselves.

You are familiar, I hope, with the mortgage problems people are having. Many families believed the hype that they could pay three and four times the cost of their house and consider it an investment, a lump of value to be used into the future. With the current reduced ability to service mortgages, and the way houses have lost face value, fewer homes are being sold as "investments". Which contributes in a big way to the collapse of the value of mortgages outstanding, and even more to the illusory "assets" of the credit default swap and mortgage derivative industries.

The national debt, on the other hand, isn't collapsing or shrinking. The US is more like the family who cannot find jobs that pay as well as before, that sees the values of assets and incomes dropping because of things outside their control. Unfortunately, President Obama seems intent on following the family destined to foreclosure, instead of the choices many families made to reduce their debt to something they could manage on their reduced income, or eliminate entirely.

How families and individuals choose to spend their (fewer) dollars won't matter much, because it won't restore the debt levels that fueled the bubble in the American economy.

Industry won't be nearly as able to respond to increased local demand, today, because the direct and indirect costs have skyrocketed. Government regulations are more onerous. Limits on access to energy, including oil and electricity, are becoming more apparent and limiting growth, and the prices aren't going to be coming down as demand increases and market supplies continue to decline. And too many of the workers of yesterday have fallen from the workplace, and the younger workers that should have been learning industry are mowing yards and hanging out.

Traditional transition jobs, with low pay and providing discipline and training to the young, are going instead to older and more experienced workers displaced from higher skilled jobs by the collapse of credit, increased cost of meeting government regulations, and increases in minimum wage. The lowered family incomes and growing masses of untrained never-employed young and minority people that should have been workers amount to a problem that may take decades -- and much more than choosing to buy American -- to fix.

The mass of unemployed and under-employed people are a drag and a drain on the American economy. While they are potentially a resource, today they consume collected tax revenue and community resources that deplete the assets that others might have used to provide jobs. They are not increasing in skills and future value to the market place; they instead represent a growing body of difficult to hire, difficult and expensive to train, and unreliable workers. The virtues of Americans in previous decades was much less about our liberty and craft, but much because of our dedication to community and nation, our employ-ability and ever increasing body of skill and knowledge.

The body of unsuitable non-workers is building. We are amassing a regulatory quagmire. Their is an increasing squeeze of declining energy available and increasing energy costs. In short, the ability of industry in America to respond to increased demand is limited.

Besides, when you hold out for the Made In America label, think of the number of jobs, in America, you threaten - that distribute, transport, and sell those products.

Choosing what to buy based on where products are made is a mere puff of breath, when applied to the problems of the torrent of economic and personal liberties abuse coming from Washington, DC and the Obama Administration, and this and previous Congresses.

If you want to fix the American economy, I suggest that you start with supporting those Senators and Congresspeople opposed to the current regulatory and tax and debt agendas. I suggest that the most effective steps to make buying American and restoring the American economy is to fix the problems facing the American workplace.

I think that the most hopeful future will hold a lot less affluence, a lot less ability to leverage debt into a sellable commodity, but with more people working for sensible wages (and not whatever government or unions can impose).

"We don't need government intervention" to solve these problems? I disagree. Government intervention is, I believe, the biggest part of America's economic woes and the biggest reason so many young and minority people are unemployable at present, and that so many American families are making do with less than in previous years, with little hope for a quick recovery. Government intervention has to be addressed first, to make anything else worth the effort.

I think much of the growth of American affluence has been directly related to the expenditure of cheap energy -- mostly fossil fuels. Fuels are no longer as cheap, and President Obama is hell-bent on making all energy, including oil and natural gas, more expensive. Those individuals, industries, and governments expecting the historical models of generating lots of money to work in the future are doomed to be disappointed, without the no-longer-available cheap energy those expectations are based upon.

Brad K.
Ponca City, OK