What caused all the supply chain bottlenecks?

https://twitter.com/typesfast/status/1453753924960219145

by CalChris • 5 years ago

735 645 5 years ago

Spivak• 5 years ago

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.

thedogeye• 5 years ago

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• 5 years ago

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• 5 years ago

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

nostrademons4• 5 years ago

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.

mindslight3• 5 years ago

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.

rdiddly2• 5 years ago

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.

spookthesunset• 5 years ago

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• 5 years ago

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• 5 years ago

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.

Afforess• 5 years ago

The TX Winter Storm and Big Freeze did more damage to the TX economy than the shutdowns. Try again.

hosteur• 5 years ago

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.

numpad0• 5 years ago

A lot of people alive and not dead

allturtles3• 5 years ago

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• 5 years ago

Tesla's California factory was shut down for 2 months.

zamadatix2• 5 years ago

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.

pdabbadabba• 5 years ago

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.

fullstop2• 5 years ago

People working from home increased demand for microphones, web cameras, office chairs.

fullstop2• 5 years ago

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_• 5 years ago

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• 5 years ago

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...

1970-01-01• 5 years ago

Alternate: https://threadreaderapp.com/thread/1453753924960219145

rdiddly2• 5 years ago

Thanks, I hate when people try to blog on Twitter.

cmenge4• 5 years ago

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.

CamperBob22• 5 years ago

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.

cmenge4• 5 years ago

Agreed, good point. I should have said "we have been faring relatively well [so far]"

WesolyKubeczek2• 5 years ago

Just you wait until China pulls a Crimea on Taiwan.

There go our semiconductors, this time for real.

jollybean7• 5 years ago

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..

ben_w2• 5 years ago

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• 5 years ago

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.

cmenge4• 5 years ago

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.

mfer• 5 years ago

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.

cmenge4• 5 years ago

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?

jollybean7• 5 years ago

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.

marcosdumay• 5 years ago

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.)

philwelch6• 5 years ago

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

xyzzyz5• 5 years ago

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.

legutierr2• 5 years ago

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).

whiddershins• 5 years ago

The pandemic didn’t kick the machine, the lockdowns and other unprecedented interventions did.

So this was a once ever event.

Consultant32452• 5 years ago

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• 5 years ago

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

BurningFrog• 5 years ago

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.

joe_the_user5• 5 years ago

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• 5 years ago

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.

joe_the_user5• 5 years ago

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• 5 years ago

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.

makomk3• 5 years ago

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.

Dumblydorr• 5 years ago

Is Twitter the best place for such analyses? They're stream of consciousness sentences and paragraphs, not cohesive narrative essays.

occamrazor• 5 years ago

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.

dredmorbius2• 5 years ago

When developing ideas, tootstorms offer some advantages.

https://news.ycombinator.com/item?id=28970983

refurb• 5 years ago

Everywhere I travel, tiny life. Single-serving sugar, single-serving cream, single pat of butter. The microwave Cordon Bleu hobby kit. Shampoo-conditioner combos, sample-packaged mouthwash, tiny bars of soap. The Tweets I read each day? They're single-serving books.

Mikeb853• 5 years ago

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.

pphysch• 5 years ago

There are plenty of things, they are just stuck on boats off California.

Mikeb853• 5 years ago

There's a shortage of many things that aren't on boats off California as well.

callmeal• 5 years ago

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/

Mikeb853• 5 years ago

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.

flyinglizard• 5 years ago

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.

erosenbe03• 5 years ago

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?

tgb3• 5 years ago

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.

philwelch6• 5 years ago

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.

tgb3• 5 years ago

But my point was that variable but decreasing costs seem to throw NIFO off too. Aircraft are the extreme example but I'm sure the first of Tesla's latest car model costs more to produce than the thousandth. Not even counting capital expenses but just by things running smoother with practice. NIFO seems to fall short here too.

notatoad• 5 years ago

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.

chernevik2• 5 years ago

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.

55873445216111• 5 years ago

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.

onion2k2• 5 years ago

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.

Dylan168074• 5 years ago

It never stops. If it does then the glass cools down and solidifies inside the machinery

That's why you can't just flip a switch to turn it off. But what if you stop feeding glass in and wait half a day first?

CalChris• 5 years ago

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.

vmurthy• 5 years ago

Not being snarky but I find it hard when well-meaning folks like Petersen don't give alternatives. Maybe the obsession with RoE is bad but what's the alternative? What measure should CEOs care about if the shareholders who put them in charge aren't happy?

dang• 5 years ago

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• 5 years ago

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.

jonnycomputer• 5 years ago

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.

evilotto• 5 years ago

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.

simonh4• 5 years ago

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.

SkittyDog3• 5 years ago

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.

thereddaikon• 5 years ago

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.

ladyattis2• 5 years ago

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• 5 years ago

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?

xyzzyz5• 5 years ago

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.

legutierr2• 5 years ago

https://en.wikipedia.org/wiki/Distributism

gruez9• 5 years ago

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.

MR4D• 5 years ago

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.

ethbr03• 5 years ago

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.

mensetmanusman• 5 years ago

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%.

Spooky232• 5 years ago

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.

outside1234• 5 years ago

By swissify do you mean go full-on with money laundering and then hide it with privacy laws?

bluetwo• 5 years ago

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• 5 years ago

What do you mean - How are they different?

analognoise• 5 years ago

As they constantly and insufferably tell us.

Whether we believe them is another matter entirely.

jonny_eh4• 5 years ago

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.

JPKab4• 5 years ago

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• 5 years ago

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.

acdha• 5 years ago

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.

makomk3• 5 years ago

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.

kwertyoowiyop3• 5 years ago

In the 80s and 90s it was called “unlocking value.”

015a2• 5 years ago

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.

tonyedgecombe3• 5 years ago

I was always under the impression that family run businesses tended to have poorer quality management.

The_Beta• 5 years ago

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

philwelch6• 5 years ago

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• 5 years ago

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.

quartesixte• 5 years ago

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.

darawk6• 5 years ago

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.

ajsnigrutin• 5 years ago

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.

bobdosherman• 5 years ago

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!

kbenson• 5 years ago

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

paganel2• 5 years ago

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.

jonny_eh4• 5 years ago

violent means (wars, revolutions etc).

Also plagues/disease. Currently relevant.

marvin• 5 years ago

Probably "The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century"

m0zg4• 5 years ago

You don't need a book on economics to understand this. Just read some real, actual history books to see that after a war or revolution of any kind _nobody_ is better off. Start with the French revolution and just go over all of them in order. A hundred million people who died at the hands of the fascist or communist governments in the past century are, one would hope, a sufficient proof of that.

newbie789• 5 years ago

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_eh4• 5 years ago

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.

parineum• 5 years ago

“wE aRe ThE mOSt EfFicIEnt wAY Of AllOCaTinG CaPitAl” arguments from very wealthy founders

"most" does a lot of work here since it's a relative term. I'm not sure I'd exactly call them efficient but I'm not sure there's a _more_ efficient way that I've seen.

phkahler• 5 years ago

> 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.

gruez9• 5 years ago

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• 5 years ago

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.

caust1c• 5 years ago

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.

JoshCole• 5 years ago

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.

Agathos• 5 years ago

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.

AussieWog93• 5 years ago

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.

ren_engineer• 5 years ago

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

andrekandre6• 5 years ago

  > tariffs on key industries to keep manufacturing here or at least in North America

would businesses be ok with that? it seems alot of expensive investing at home when it could be done cheaper overseas...

im pretty sure massive lobbying would incur... but maybe im not seeing the whole picture.

BenoitEssiambre• 5 years ago

obsession with RoE is a big part of the problem

Is this even still true in a super low interest rate environment?

Yeah in the 80s and 90s, tying your resources into inventory would have cost a lot in terms of missed opportunity to invest the money elsewhere. But with financing rates near zero or even sometimes negative in real term, wouldn't even the wall street guy be like: sure keep some inventory, cash is cheap right now.

This RoE argument seems very last century to me.

scottcodie2• 5 years ago

Economists would say that companies are willing to accept higher risk, the 'return on equity' isn't the only driving force. The question here is who shoulders the risk, the company or the consumer. With JIT, the consumer may bear more of the risk. It may not be a bad thing either.

New companies aren't all trying to be rent-seekers, they also try to dodge existing regulation or actually innovate.

panarky2• 5 years ago

The problem isn't RoE itself, it's the focus on short-term RoE.

You can juice RoE in the short term by removing slack and shock absorbers, because increasing the brittleness of the supply chain probably won't show up in this quarter's returns.

The supply chain for fuel is brittle. There isn't sufficient inventory in tanks to buffer even short disruptions. A pipeline offline for a couple days is enough to make a crisis.

People catch wind of the crisis and start filling their tanks at three-quarters full instead of one-quarter full, and the brittle supply chain breaks with the accelerated demand.

Same thing we're seeing with the global supply chain which was already brittle, now individuals and companies are putting in bigger orders sooner to compensate, and it fails in the face of accelerated demand.

andrewstuart• 5 years ago

Queue dynamics.

Late entrants to a backed up queue take exponentially longer to service.

motohagiography• 5 years ago

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.

flurie• 5 years ago

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?

jjoonathan• 5 years ago

Yeah, when they get public bailouts.

whatever18• 5 years ago

“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• 5 years ago

It would impact Apple's ability to raise money on the stock market tho.

jollybean7• 5 years ago

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..

lr4444lr• 5 years ago

The board of directors would almost certainly buy back all their shares if that happened, and find a time to resell once the mass insanity ended for insane profit.

philwelch6• 5 years ago

That wouldn’t be a problem.

The problem would be if tomorrow everyone sold Apple stock for $1000, and the government took that as a reason to tax every Apple shareholder for “income” of over $800 per share in the stock casino, forcing Apple’s current shareholders to divest themselves to new shareholders and hence lose control of the company.

ootsootsoots• 5 years ago

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.

AnimalMuppet3• 5 years ago

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.

TheBigSalad• 5 years ago

Only the superwealthy can save us.

dillondoyle• 5 years ago

Looks like that won't be in the bill.

But it's critical to note that the proposal has different rules for privately held stock & real estate. So the tweet author's buried argument doesn't hold water.

I believe those assets would mostly be treated the same as they currently are, e.g. sold or death.

For the 700 or so people who are targeted it basically creates a tax on the collateralized loans they get to avoid selling stock/cap gains in the first place. While not doing that directly, that's the effect of it.

And they get 5 years to pay the initial bill. 23.8% / 5 = 4.7% growth a year to be even (well something like 6 or 7 adding the new annual 23%). Most of these guys will likely generate more on paper profit than and they get deductions for any losses if they don't

It's what pisses me off most about the proposed Purdue Sackler settlement. Giving billionaires such long lead times to pay off fines and taxes allows them make more money than they owe.

The last graph on the WSJ article though says “Smart investment bankers and asset managers are already thinking about how to financially engineer products that will emulate existing stocks but be hard to value”

Check out the 2nd link for Pandora Paper reporting showing one egregious example of how they take advantage of this.

The owner of Nike puts millions of nike stock into a GRAT, which is privately held, and then the government gives that grat a 15% discount before it's passed along to his children.

Shouldn't get tax benefits for something that you claim is harder to sell (privately held stock) when in actuality the assets are 100% publicly traded nike stock.

The Wyden tax bill is a 100 pages long so maybe it goes after some of that crud, but there will always a scheme to lower your taxes.

https://archive.md/W2074 https://archive.md/yN7M7

hprotagonist• 5 years ago

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".

mrkramer2• 5 years ago

Long story short: Big spike in demand in a very short period of time.

Mountain_Skies2• 5 years ago

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.

mrkramer2• 5 years ago

If service sector is and was disrupted by lockdowns it is logical that goods spiked in demand. Demand shifted from services/goods to only goods or only goods and little bit of services. I'm speaking about aggregate demand. Goods like consumer electronics, home appliance etc.

justinator• 5 years ago

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...

_ph_• 5 years ago

Does it invalidate the message, if you tell it well?

nostrademons4• 5 years ago

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.

starky3• 5 years ago

Exactly, I think the most succinctly way I've heard it put is, "Everything is Marketing"

BoiledCabbage• 5 years ago

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• 5 years ago

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• 5 years ago

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.

015a2• 5 years ago

Are you really, actually sorry, or are you just saying that to soften your message? Isn't that manipulation?

nimbius• 5 years ago

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.

erosenbe03• 5 years ago

Hook NPR up with some people to interview and some B-roll crane and diesel noses. They have been discussing this and might appreciate.

dredmorbius2• 5 years ago

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• 5 years ago

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.

IronWolve2• 5 years ago

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.

nebula88042• 5 years ago

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.

xondono• 5 years ago

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• 5 years ago

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.

umanwizard2• 5 years ago

I doubt this level of shutdown will be tried for the next pandemic, even if it’s exactly as severe as covid. People won’t tolerate it.

joe_the_user5• 5 years ago

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.

stainforth3• 5 years ago

B) Buyers are not willing actors

chii6• 5 years ago

Why is that? they arent forced to "buy" at gunpoint.

guerrilla• 5 years ago

Why do you think that?

BikiniPrince• 5 years ago

I think your first mistake was saying 'I believe.'

Chip manufacturing has a clear start/end date for the product lifetime. This is necessary when you are incorporating a product into a design and product lifetime. Sometimes they will 'oops' you and send it out of print early. Generally, they have a 'b' product that "meets" your needs or product engineering just scrambles and tries to guess how many we need for a final run for our EOL. Much like the guy above me, the former requestor and probably his boss... I pad my estimates. Thank the baby Jesus I don't deal with the complicated world of sales and cocaine.

I want to put a big asterisk on "meets" because one man's performance metric is another man's failure. In discrete circuits this can be harmonics and in more complicated topology this could be tuned for an entirely different (but potentially acceptable) set of characteristics.

Enter the hardware qualification rounds where people like me make people cry and deadlines slip.

Supply lines work in months of advancement and trust me when I say this they have been fighting with chip shortages for months.

The people who care about costs have been playing a weird game of rubiks cube and the people who don't have been buying everything for year+ production. Guess who won that game of planning competition...

Taiwan going complete Orwellian and shutting down for months screwed the market in so many ways. Short sightedness on bean counters screwed themselves in many other ways and automobile manufacturers had the brilliant idea to just 'buy it all out' and give the manufacturers a big payday.

Seriously, chip manufacturers are like shoe string manufacturing. The latter counts wartime boot string orders as a big payday and that is something a lot of us look at as a bad year in a paycheck. (well the ones with skill anyway).

Lines are created with a product if the current line cannot manufacture that product. There are cases where they have to shutdown and completely retool. This isn't remotely the case regarding components today. The line simply stopped and/or went to minimal production. It wasn't news or a surprise because this is garbage we have been fighting with for months. Taiwan simply stopped producing at the level they were because they have some severe lockdown strategy.

sct202• 5 years ago

Taiwan didn't lockdown their factories. Their border is highly restricted for entry but they haven't really gone beyond closing indoor dining and karaoke.

In Q3 2021, TSMC shipped 12.5% more wafers year over year and +5.7% quarter to quarter during the period with the highest covid restrictions. And that's already on top of the 19% increase in shipments for the full year 2020 over 2019.

https://investor.tsmc.com/english/encrypt/files/encrypt_file...

hk1337• 5 years ago

What's the deal with writing 20+ consecutive tweets instead of a blog post and tweeting the link to the blog post?

dragonwriter5• 5 years ago

On Twitter as everywhere else, approximately nobody clicks the link. But there's some chance they’ll read through a chain of tweets.

wvenable• 5 years ago

I clicked a link to get to this twitter feed monstrosity.

malfist• 5 years ago

Worse, 20+ tweets that don't provide any more nuance than the original tweet, so this literally could have been one tweet

coolso• 5 years ago

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.

stjohnswarts• 5 years ago

Blogs just aren't that popular anymore, so maybe he doesn't keep one and Twitter is his main outlet?

president• 5 years ago

Is anyone honestly surprised? Seeking short term gains has been the story of the last decades.

patrickyeon• 5 years ago

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• 5 years ago

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• 5 years ago

they have trouble surviving in a world where the competition is supported by modern finance

The problem with coöperatives is longevity. We have white-collar coöps 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.

spiralx4• 5 years ago

Can you have a cooperative with limited liability? I'm sure you can emulate it with a limited company and particular arrangements of stock ownership and voting rights, but I doubt that's easy or cheap to set up.

The John Lewis Partnership in the UK is a public limited company whose shares are entirely owned by a trust that pays shares of profits to all of its employees, which isn't quite "ownership" but close, and they have a $15bn revenue. Publix Super Markets in the US has a $45bn revenue and is privately owned with all employees receiving stock.

https://www.investopedia.com/articles/insights/051316/6-succ...

Financing is probably an issue at a certain level but it doesn't seem to be limiting otherwise. They're just unusual, although if you consider startups giving employees a stake isn't that strange today.

dendrite9• 5 years ago

This is something that is interesting to me, I have been reading about various ideas for worker owned companies. Some friends and I have been talking about how we might organize a side business built around a similar structure and where it might fail for reasons that are not just the business side of things.

This climbing equipment company's stated values are an appealing target to me right now. https://www.totemmt.com/about-us/

ltbarcly3• 5 years ago

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.