With containers weighing up to 30 tons? I don't think so.
And even if you do... great, now you have it on a different ship. You still have to get it on land, typically onto a truck. So you need some kind of a crane. And those are pretty busy these days...
Maybe SpaceX can send "Of Course I Still Love You" with a bunch of container trailers to be loaded directly. It could then sail back to port with a fleet of semis waiting to pull away. Totally human free, so no covid delays.
Simply reinvent shipping to not use heavy containers but rather lighter weight parcels.
We recently bought a custom couch that was delayed 3 months sitting on a ship. I offered to haul it off the ship myself, which of course the government wouldn't allow.
COVID: come for the newfound hatred amongst family and friends, stay for the perpetual commerce dysfunction and dystopian nightmare! Are we having fun yet?! Yay!!!
Maybe each generation needs a crisis ? It was usually wars in the past but its a pandemic now ? Something to tell to the next generations, just instead of dodging bombs its dodging an invisible danger ?
Not all crises are equal. This current one didn't really bring people together. And although I wasn't around to see it, it's hard to imagine 40% or whatever of the population in 1942 were all, "that guy in Germany isn't even so bad, in fact I don't think he even exists at all, I'm going to hoard aluminum and steel for personal use now."
We spent 40 years chasing down and eliminating every redundancy, buffer, backup, and alternative in the name of "efficiency" all the while globalising every system we could. Even the slightest hiccup is liable to bring such a fragile system down, and this was not a slight hiccup. And as supplies dwindle throughout the system, demand increases at every interface point, not just the end-users. This machine is not going to come back up as it is. It just can't. We need to start putting those backups and redundancies back in place, which will cost throughput, latency, and (fuckloads of) capital.
Supply tends to be very elastic when demand exists. There are shortages, yes, but for some price I can get almost anything you could ask for. I'm pretty sure part of what we are seeing is price gouging.
E.g. for many electrical products I see that the stock has shifted to resellers, you can look on octopart (assuming part is large enough to be tracked). What's hard to evaluate is how real the shipping shortage is. It may be partially people demanding more pay, or it may be entirely a shortage.
Yes, but you must use regulation to require a resilient supply chain, as it’s cheaper not to build it to be resilient. Capital optimizes for capital, people must optimize for people.
Well, no. A lot of businesses would store spare parts save the fact they are taxed quite heavily in some jurisdictions.
My experience with lean/JIT in the manufacturing space shows when it is actually done at every level your business starts hemorrhaging money waiting for parts to arrive. Each step of the process unless perfectly foretold adds 1-3 weeks in a good quarter. It is actually the local preference that we keep more spares than we do, but accounting says no.
If you read the fine print with how Toyota implemented lean you find out that they made their partners contractually obligated to keep inventory, not themselves. Inventory was still kept but who paid the tax bill and who paid upkeep changed.
Agreed, I worked in food manufacturing for a while, and was fortunate to have suppliers who maintained 1-2 shifts worth of almost all obscure components as a good-faith gesture. As most of our own backstock was perishable, FIFO rotation kept us
from having way too much, or any tax issues.
I learned it was much better to deal with CEO/investors grumbling about $$$ tied up in backstock than Type A Sales Manager + CEO/investors wondering when the f^ck a single critical component would let us restart the production line to launch an overdue product. I don't miss that job! There was also the "Google the new CEO on his first day and find out he's under SEC investigation for withholding payments to his previous corp's suppliers to pad the balance sheet for buyout" but that is another story entirely!
That sounds pretty easily gameable, and how do you calculate an appropriate percentage that applies to many different businesses and industries? This sort of regulatory micro-managing is generally a really bad idea unless the regulator works very closely with the business. But that means greatly increased costs of implementing the regulations.
A lot of our customers, especially those with internet shops, are moving to bonded warehouses where they can keep the goods without paying import taxes until they need the part or made the sale. Then they do an import declaration on just what they need/sold.
This way they don't have to cash out for whole containers at a time. Sure they'll have to pay for more declarations, but overall it's usually worth it, especially if the goods can sit there for a year or more.
Our customs systems here is totally not made for this new world though.
Of course there is. But directing how much inventory a company has to hold seems a bit more invasive than say, demanding a company can't dump chemicals on the ground?
Can you explain this? Last year a tropic storm came through north Georgia and our power was out for twice as long as it was out in Texas but for some reason Texas is now the poster child for unreliable power delivery while unless you live in north Georgia, you're probably not even aware there was an extended outage last October. Are those of us in Georgia beneath your notice?
Texas’ power market is dysfunctional. It has no capacity market, so generators aren’t paid to have a certain amount of generation capacity available. It’s every generator for themselves. This is great during normal times, and drives down the cost of power. “Cheap energy is good!”, says Texas. During times of crisis, you end up with bankruptcies, enormous bills, and people going without power (and in extreme weather conditions, ending up dead, as happens in February in Texas) when they otherwise wouldn’t have to in a functioning electrical system where electrical generation capacity was firm and compensated.
ERCOT also didn’t know it was shedding natural gas compressor station circuits when performing rotating blackouts, causing a cascading failure when natural gas generators were starved of fuel. That’s just plain ol’ incompetence.
> ERCOT also didn’t know it was shedding natural gas compressor station circuits when performing rotating blackouts, causing a cascading failure when natural gas generators were starved of fuel. That’s just plain ol’ incompetence.
And despite all that incompetence, they were much better at maintaining the power supply than north Georgia. That would seem to imply that the system is even better than the performance gap would indicate.
If you want companies to hold more inventory (complete or not), a good first move would be to stop taxing them for it. After doing that, we could look at whether additional regulatory measures were required.
If you want them to in-house more production, allow all of them to write-off 100% of capital equipment purchases in the first year.
so just property tax then, like an empty warehouse holds the same tax burden as one filled to capacity with inventory? I thought someone was suggesting more than property tax.
Corporations are taxed on assets that they accrue (increases in total holdings are taxed as 'profit'). This applies to inventories, capital assets, and real estate.
This taxation is why corporations often prefer to lease rather than own, and why they often pay out dividends rather than using the money to collect assets.
wow, I never knew that. I always perceived inventories as risks companies took assuming they'd be able to sell it all or at the least would be able to liquidate it at cost if it came to it. Sounds like the books are already negative just taking on inventory from the get go above production and shipping and whatever else.
If you sell the inventory at a loss, you can 'write off' the 'lost value', which reduces your profits on paper in that fiscal year (and the corresponding profits), but you did already pay taxes on holding that inventory.
All of this is one of the reasons that software businesses are so heavily advantaged by the tax code. They don't have to pay taxes on (much) capital equipment or inventories, and the smaller facilities are also beneficial from a tax perspective.
>These taxes reduce the amount of money you can spend on capital equipment, inventories, and facilities, which reduces your maximum rate of growth.
I mean, yes, but not really. They're not a meaningful portion of their revenues. Typically it's around 1% of the acquisition cost of the item inclusive of any fees required to get it in your inventory. This is akin to complaining about paying BWC taxes which are about 1% of your payroll. If they're a real hardship to your business, your business has more problems than holding excess inventory.
I’m not sure where you’re getting your “1%” from, but corporations are liable for full income tax (21% in the USA), on the (depreciated) increase in the value of their assets.
The original start of this thread by jxramos was referring to how inventory was taxed. "curious, who's taxing for inventory?" You responded:
>Corporations are taxed on assets that they accrue (increases in total holdings are taxed as 'profit'). This applies to inventories, capital assets, and real estate.
and
>you did already pay taxes on holding that inventory.
Inventories are taxed as property which is, in general, about 1% of the cost (to the company) of the item.
You're conflating income and property taxes. What your describing in your previous posts is an income tax, which is the tax paid on the net income associated with an asset. However, you have to dispose of the asset to pay that tax. Until then the asset is property and it's only subject to property tax.
Normal accounting disclaimer applies. Definitely get an accountant and don't take accounting advice from the internet.
>"Inventories are taxed as property which is, in general, about 1% of the cost (to the company) of the item."
Most jurisdictions don't have the asset taxes you're describing. Some do, in which case inventories cost extra to hold each and every year.
>"You're conflating income and property taxes. What your describing in your previous posts is an income tax, which is the tax paid on the net income associated with an asset. However, you have to dispose of the asset to pay that tax. Until then the asset is property and it's only subject to property tax."
No, when a company uses its revenues to buy stuff and hold onto it, the government counts the value of that stuff as profits, and taxes are paid on that 'income' in the fiscal year of acquisition. The assets are then gradually depreciated (with the depreciation treated as a loss). If the assets are sold off, income taxes are assessed against sales in excess of the depreciated value, and losses are assessed (along with corresponding write-offs) against sale values below the depreciated value of the asset.
>"Normal accounting disclaimer applies. Definitely get an accountant and don't take accounting advice from the internet. "
I completely agree with this, especially since tax law varies widely, even between Canada and the USA.
>No, when a company uses its revenues to buy stuff and hold onto it, the government counts the value of that stuff as profits
This is not quite right, though it is mostly correct in describing depreciation. When you purchase a depreciating asset it has a book value that is depreciated over time. That book value is not counted as income and definitely not as net income (profits), though it will appear with other assets on the balance sheet. You've essentially converted one type of asset to another, there is no gain or loss there to tax.
For depreciating assets, the depreciation is deductible because it represents a loss in value of the asset. In general, this can be taken when the depreciation is realized. If you dispose of the asset you pay taxes based on the deprecated value, like you've described.
It's important to realize that corporate taxes are almost exclusively on net income, that being the money left over after the business has done all of it's financial activities.
Please no. The last thing we need is another bunch of half-baked regulations passed because a bunch of people who don't know what they're talking about demanded "something must be done!" in response to some temporary crisis. COVID will subside eventually, dysfunctional regulations have much greater staying power.
The regulations are not for COVID. They are for future supply chain shocks. The executive branch has already begun to explore the problem (see citation below).
“The 100-day reports make clear: more secure and resilient supply chains are essential to our national security, our economic security, and our technological leadership. The work of strengthening America’s critical supply chains will require sustained focus and investment.”
Demanding it not be so will make things permanently more expensive for everyone, not only in the monetary sense, but also in labor and material. Subsidize or ration if we must, but only temporarily and in response to a crisis.
>> Yes, but you must use regulation to require a resilient supply chain, as it’s cheaper not to build it to be resilient. Capital optimizes for capital, people must optimize for people.
> Please no. The last thing we need is another bunch of half-baked regulations passed because a bunch of people who don't know what they're talking about demanded "something must be done!" in response to some temporary crisis. COVID will subside eventually, dysfunctional regulations have much greater staying power.
Pick your poison: either capital decides to build a sufficiently resilient supply chain or they get subjected to "half-baked regulations." They're not going to do the former, so say hello to the latter.
Do nothing and profiteer during the next crisis is not an option capital should be permitted to take.
But we won't put those redundancies back in, at least not at scale, because the economic benefits of not having them for each individual economic actor means those who don't chase efficiency as ruthlessly as others will get eliminated. These redundancies somehow have to be mandated for everyone in a particular economic space so no one is disadvantaged for being robust against such supply line interruptions.
Any supplier who could actually sell right now would be able to take advantage of this market and build serious market share. So it’s a company with these reserves that will do well in a similar situation.
We already have, its just not visible. Those who had stockpiles of chips (Toyota, many other japanese companies affected by the 2011 tsunami) were able to supply and provide products, thus taking market share - or sell chips at a larger price as demand sored. This strategy of holding strategic reserves on premium goods already paid for itself. Similar to that, the scalpers - horders of rare/in demand products fullfill that job in capitalism - at the risk of sitting on a pile of lowprice good.
We are going to see a bullwhip effect [1], it's just where and when it happens. I heard two things this morning about more car shortages (due to chips), Manheim auto auction has had extremely low volume this year, cars going at auction for more than they sold at retail 3 years ago. Some of this I think is sticky (I don't see new car dealers lowering their prices or being willing to negotiate quickly), others though I think will have a drop as inventory picks up.
Sell high buy low. I just don't know what to sell at the moment.
>> Any supplier who could actually sell right now would be able to take advantage of this market and build serious market share. So it’s a company with these reserves that will do well in a similar situation.
> It might do well in these crises, but if it can't survive the times where everything works well, then it doesn't help.
See also: all the new US N95 respirator manufacturers that popped up during the pandemic. Now they're laying off most of their staff and most will likely go bankrupt, because their customers went back to buying cheaper Chinese masks as soon as they could.
They don’t even need to raise prices necessarily to a gouging level - they can just sell product while others can’t. Build brand loyalty, take market share.
I read a few articles in the past year, since supply issues first began showing up, praising both Apple and Toyota for being less reliant on supply chains out of their complete control.
In the last week, I've read several more doomsday articles like this one warning us it's going to get worse before it gets better, and both Apple and Toyota have been mentioned as now having to delay releases or scale back sales targets.
Something that doesn't make sense about political discussions around tariffs (at least in the U.S.) is that it seems like the overwhelming narrative is that "tariffs are bad for business, so we shouldn't have them if we can possibly avoid it". We don't talk that way about other taxes. If you said "we shouldn't have corporate income taxes because they're bad for business" the Republicans would mostly nod along, and the Democrats would say, "Wait, hold up there. Of course they're bad for business, but the point is to raise revenue to pay for other things. Governments need revenue from somewhere." But then when it comes to tariffs for some reason it's treated differently and Democrats are suddenly on board with lowering taxes, with the whole debate being in the context of whether protectionism versus free trade is better for local business (with both major parties mostly leaning towards free trade), and the aspect of revenue isn't even part of the discussion.
> If you said "we shouldn't have corporate income taxes because they're bad for business" the Republicans would mostly nod along, and the Democrats would say, "Wait, hold up there. Of course they're bad for business, but the point is to raise revenue to pay for other things. Governments need revenue from somewhere."
Well, some Democrats would say that, but a lot of other Democrats would say something more like "Of course they're bad for business; that's the point! We hate business and we want to punish it for being business."
Note also that we just had a Republican president who focused heavily on imposing tariffs where there were none before, and we now have a Democratic president who approves of those tariffs and wants to keep them in place. So the perspective that both parties are united in disapproval of tariffs would seem to be somewhat off.
> lot of other Democrats would say something more like "Of course they're bad for business; that's the point! We hate business and we want to punish it for being business."
That's an extraordinary suggestion. Why would any political party adopt that position?
Because it's popular. Vilification of merchants for being merchants is a tradition at least as old as recorded history. Vilification of the rich for being rich is much less old, but it's a quite robust tradition of the American Democratic party.
I think this is a little too reductive. Local businesses are consumers too, just in the middle of the chain. If they get hurt as consumers more than they gain in reduced competition they hurt.
I'm not so deeply read on this, but I'd imagine this is why things like brexit and tariffs get sold but result in everyone being net worse off.
A significant burden is actually the lack of regulatory alignment. Before Brexit there was a largely customs-check free flow of goods in and out of the EU. Now we have more delays and paperwork. This is not a tariff, but it imposes costs like one.
That is true although it doesn't really change the point. The proponents for Brexit mostly wanted to free themselves from EU regulation and the voters wanted to cut down on immigration. The only people complaining about tariffs were remainers (including myself), we were arguing they would increase and we were wrong.
Tariffs will be good for some portion of local _producers_. They’re generally bad for everybody else, and the list of local producers they’re good for is not always very long. If your business is selling products, you don’t want your products tariffed. If you need to import parts of your supply chain to make stuff, you don’t want that tariffed either.
There's been pretty extensive study in macroeconomics, over the last 2 centuries, of which taxes are worst for the economy. The tl;dr is that the worst taxes are those that change consumer behavior the most (unless the change in consumer behavior is the goal, as with sin and externality taxes), while the best change consumer behavior the least. This is because of deadweight losses: when consumer behavior changes to avoid the tax, that a.) directly reduces mutually beneficial transactions and b.) means that the tax rate needs to be higher to collect an equivalent amount of tax dollars, because consumers change their behavior to avoid it, and the higher rate itself further distorts the market.
So land taxes, VAT, and income taxes are good; capital gains taxes are middling; sales taxes and luxury taxes and tariffs are bad. Tariffs are among the worst in this hierarchy because their incidence is - to an economist - arbitrary. In classical economics, specialization is good, and industries should go to whichever country is most efficient at providing them. Any sort of national tariff interferes with that: to the extent that the tariff succeeds at collecting revenue, it does it by making consumers choose an inferior product (in the sense that without the tariff, they would've chosen differently).
I'd expect the political rebuttal to that is "But national security - we want to make sure all our homegrown industries are competitive and we can make complete supply chains within our borders." I suspect there's an element of Lake Wobegone self-deception in there though: people think that they're better at everything than they really are. When nations cut themself off from the global economy, they often think that they've made themselves self-sufficient right up until a foreign power that's been trading the whole time shows up in your capital city with a fleet of gunboats to forcibly open your country to world markets.
> Tariffs are among the worst in this hierarchy because their incidence is - to an economist - arbitrary. In classical economics, specialization is good, and industries should go to whichever country is most efficient at providing them. Any sort of national tariff interferes with that: to the extent that the tariff succeeds at collecting revenue, it does it by making consumers choose an inferior product (in the sense that without the tariff, they would've chosen differently).
Listening to the classical economists in this case is a lot like listening to a paperclip optimizer complain about all the non-paperclip production that wastefully divert resources away from more paperclips. They have a point, but only from a perspective that leaves a lot of important stuff out.
The point is if you ramp up costs and inefficiencies in your economy you're making yourself uncompetitive globally and that can have lots of undesirable consequences, including strategic ones. There is of course a balance to be struck. Are we taking advantage of efficient production abroad to cut prices for consumers, or are we becoming excessively dependent on foreigners?
Whichever it is, the point is that tariffs are the worst way to coerce change in an economy. There's no guarantee they will have anything like the effect intended, because the point in the economy where they're levied (importing X) is completely different from the point in the economy we're trying to change (locally making X). Even if they do, the costs of the change can be incredibly high. If you want to promote local production, just subsidise local production. It's generally a bad idea, but the least worst by a long mile.
> Are we taking advantage of efficient production abroad to cut prices for consumers, or are we becoming excessively dependent on foreigners?
Another important point is that outsourcing as-actually-implemented isn't usually seeking "efficient production," just labor arbitrage.
> If you want to promote local production, just subsidise local production. It's generally a bad idea, but the least worst by a long mile.
I'm also fine with subsidies, but often that seems more difficult to sustain politically. It seems like tariffs and subsidies go hand in hand rather than be an either/or policy (e.g. use tariffs to fund the subsidies).
Labor arbitrage is efficient production. If you can outsource a job for less than it costs domestically, it means labor is underutilized in the foreign country and can be employed for higher-value uses.
Pretty much any arbitrage is an economic inefficiency being exploited, whether it's financial (information inefficiences), shipping/merchants (geographic & local preference inefficiencies), storage (time preference inefficiencies), outsourcing (labor), etc. And in the course of exploiting it, it makes the inefficiency go away.
> Labor arbitrage is efficient production. If you can outsource a job for less than it costs domestically, it means labor is underutilized in the foreign country and can be employed for higher-value uses.
I think the key points are 1) that's not the kind of thing the word "efficiency" typically brings to mind, and 2) there are quite valid political reasons to want to discourage that kind of "efficiency."
In a lot of cases a better alternative to subsidies is just to have the government be a buyer for locally-made products. That way you're not just handing people money, the government is actually getting something. That seems like it should be more politically viable. That's assuming the government has some use for the things being subsidized.
> When nations cut themself off from the global economy, they often think that they've made themselves self-sufficient right up until a foreign power that's been trading the whole time shows up in your capital city with a fleet of gunboats to forcibly open your country to world markets.
Japan still did a lot better for itself than most other places that western gunboats showed up in the high colonial age. Is this not because it had a healthy political economy, and could meet foreign demands while still continuing "national" development?
Yeah Germany came very close twice to winning both world wars. The Soviets won the lion's share of the territorial spoils of WW2 despite emphatically not being a free trade power.
The Union won the Civil War despite almost alienating Great Britain and coming within a hair of war with the Brits multiple times. The Confederates were the free trade power supported by Europe throughout the entire war. As Ulysses Grant said during the final days before the Confederate surrender, "The British mark was on every battlefield of the war." Didn't work out for the free-trading Rebs the way that they hoped, but them's the breaks.
It's not actually the 'own' that people think it is. Free trade is not a cheat code for permanent global domination. It's effective but it has limitations and weaknesses. The type of arrogance that leads to the belief that it grants an aura of invincibility is just hubris.
The nations that use autarkic measures are not just stupid morons who are and were doomed to lose ahead of time: that's just believing our own Atlanticist war propaganda too much. Make no mistake, the modern sea powers have come very close to defeat and humiliation many times over the last couple centuries, and one of them was effectively annihilated (the British) in part due to the tidal wave of Asian nationalism.
VAT applies at a flat rate at all levels within the supply chain, sales tax is only collected from the consumer with the final sale. Under a 5% sales tax, the consumer pays $50 on a $1000 iPhone when they buy it at retail. Under a 5% VAT, Apple pays 5% of its profits (not revenue), then whoever makes the lithium-ion batteries pays 5% of its profits, then whoever mines the lithium pays 5% of its profits, and on down the value chain.
Among other economic effects, VATs do not incentivize vertical integration. With a traditional sales tax, corporations can avoid paying the tax by bringing all the suppliers in-house so that there's no transaction to tax. With a VAT, it's all the same: either you pay the tax or you pay the supplier and the supplier pays the tax.
That is not correct. VAT is added in the supply chain as a flat rate on price, then you keep an account of in-going and out-going. Then the state makes up the difference in the end of the fiscal year depending on if your customers were other businesses or consumers.
This is precisely to prevent your easily spotted mistake of promoting vertically integrated companies.
VAT doesn’t accumulate like that. If my business pays VAT on some goods it gets to claim that back at the end of the quarter. For most business it’s neutral (apart from the paperwork).
Companies don't pay VAT, it is a consumer-only tax. In countries having VAT, companies always treat VAT as an item-in-transit in their books.
In your Apple example, the consumer pays the $1000 plus the 5% VAT to Apple, and Apple sends the 5% VAT to the IRS. If Apple bought components for that phone that included VAT, the supplier providing the components sends that VAT to the IRS, and Apple can claim that VAT from the IRS.
> Under a 5% VAT, Apple pays 5% of its profits (not revenue)
Apple pays 5% on the value it added, not on its profits on the phone.
If they buy $500 in components from upstream suppliers and sell the phone for $1000, they’ve added $500 of value (on which they’ll remit VAT), but not achieved $500 of profits on that phone. (They have labor and other overhead.)
There is no difference in outcome. VAT is paid on every stage on inputs by companies BUT they claim it back and if the input comes from a different country they don't pay VAT in the first place. The only one not being able to claim it back is the consume, like a sales tax.
It makes detecting fraud easier since you can see a companies input vs output vs profit.
Transaction based taxes (VAT, income taxes, sales taxes) decrease the distance money can travel away from the government.
I don't know if it is true but I make this prediction: High transaction taxes correlate with or even cause expensive government projects, excessive public sector employment and excessive welfare.
> In classical economics, specialization is good, and industries should go to whichever country is most efficient at providing them. Any sort of national tariff interferes with that: to the extent that the tariff succeeds at collecting revenue, it does it by making consumers choose an inferior product (in the sense that without the tariff, they would've chosen differently).
The problem with that argument is that in a modern globalized world, what you're often doing is buying products at a lower cost because the negative externalities aren't reflected in the price. Products are often cheaper in countries with few environmental regulations and exploitative labor practices. Free trade can be a race to the bottom.
The general argument that tariffs between countries that are roughly equal in terms of wages, regulations, human rights, and so on causes more economic harm than the revenue it generates seems plausible though.
It's simply not possible for the US, or any of the developed nations to expand local production like that at any economically significant scale. We just don't have the work force to do it. Before the pandemic hit developed world employment was at a peak, and we're rapidly hoovering up unemployed labour back into work, mainly as Leisure & Hospitality, and Transport & Logistics ramp back up to capacity.
Also tariffs cost a fortune to the economy and generally depress consumption a lot more than they boost employment. One reason is investors are very wary of capitalising local production baed on tariffs that could disappear at any time. It's a very precarious basis on which to build a business. The increased costs to customers per job can be hundreds of thousands of dollars.
I'm absolutely no fan of subsidies, they're a terrible distortion of incentives, but they're many, many times less godawfully wasteful than tariffs. It's also much easier to see where the money goes and measure success (or, more likely, failure).
Automation probably kills the higher paying jobs first because that provides the most return. Lower paying jobs get automated last, and those seem to be where employers are having problems hiring.
How long until your favorite restaurant gets rid of servers? You will order through a screen at your table, then they will conveyer belt your food to you.
Automating servers has been tried since the early years of this decade, by McDonalds in particular, and that same company is now hiring again paying $15 per hour for those same very simple positions.
Automation isn’t going to happen like that, although I am unsure what the obstacle is for something as basic as fast food.
All the tech is there.
Automatic burger machines have been here since the 70s.
Ordering can be done through a phone app. Where is the bottleneck?
Now if selling hamburgers can not be automated I would like to know how something more complex like political strategism or software engineering or market analysis is supposed to be automated.
People have been complaining about automation since there has been automation.
I’m not familiar with the US, but here in the UK we’ve had fairly low unemployment for a while, in particular long term unemployment was under 400k, most unemployed were between jobs. We also had a lot of unfilled positions. The skills gap was and still is a pressing problem.
Somebody will bring up strong AI. I’ve been hearing about that being imminent my entire life, no joke, and I’m 55 in a few weeks.
You can follow this pattern right down to the individual level, too. We train and work as deep specialists at the expense of general capabilities down to and including our ability to provide the basics of life without sourcing them from those same complex supply chains. The economic incentive for this is very strong, and the same weaknesses creep in the longer the situation continues.
Not so clear how to foster redundancy coming back in at that level.
No, we won't. The system can't be brought back up in that configuration. That's how cascading failure modes work. To get back to the volumes we have been used to a more resilient system must be built. Only then can it be made brittle again by relentlessly pruning "inefficiencies"
Are you sure things aren't better now than 40 years ago? Everything is certainly more affordable for the average American and the standard of living is higher than ever. Sure, there was a run on toilet paper when the pandemic started and wood prices at Home Depot right now are through the roof (heh), but my gut feeling is the trade off is worth it.
To continue your analogy it's like the world's supply chains stopped colocating their own servers, shedding unused capacity, in favor of AWS. Sure, there will be a hiccup under unexpected load, but new instances will spin up soon enough and meanwhile you've saved a ton of money, resources, and energy when demand was low.
Everything but housing and education you mean. Standard of living is probably on the whole worse. My dad had a high school education and a ridiculously good pension, full health vision dental, profit sharing, working in the maintenance department in the 80s.
The best reason for housing prices increasing faster than inflation is that the western world has made it policy that middle-class wealth is based on housing prices rising faster than inflation so many economic actors will personally benefit from higher and higher housing prices.
Its really just because of supply and demand. We made it illegal to add more supply. Los Angeles up until the 1960s was zoned for 10 million people with a population under 3 million, you were allowed to develop your single family home into a 25 foot wide 5 story brick apartment building and many of these went up in neighborhoods like hollywood and koreatown.
Today homes are out of reach for middle class because we have a population of 3.9 million in los angeles, but have a zoning capacity of only 4.2 million. It's not exactly rocket science how to fix this mess. Legalize building housing and housing will appear to satiate demand.
>Things are better now than 40 years ago and yet are worse than 7 years ago.
Cars are safer and last longer (and cost 2x as much). Some forms of medical care are better (surgery). TVs have more resolution and increasing sources of media leads to more mouth agape consumption at home.
Other than that, I can't see any advantage to now over then.
I'm not sure we do. Right now this supply side sux but it will likely be fixed in a few years no doubt.
The risk if we bring an overly heavy hand of government is greater issues on other areas. Sure they'll make sure computer chips are available but maybe at twice the price or half the quality as factories just need to hit volume numbers, or potential to. It might stop new entrants as e.g. now they have to build a factoryfor twice the actual sales capacity and that cost doesn't make sense. And surely a bunch more.
I do think certain items should be deemed essential and local production encouraged, off the cuff but 30% needs to be domestically sourced type thing. Like what we saw with medical equipment in the early days of covid. When times get tough, countries get selfish fast and a nation needssome level of protection for adverse events. But forcing business to over deliver capacity seems likely to bring in a whole other level of issues and likely cronyism.
At least in my non-expert view we shoot should ensure the most basic survival items like food, essential medicine and energy have significant redundancy. After that, we need to take the risk to allow capitalism to do what's its best and and create efficient production or I suspect we will being greater issues in replacement of the ones we solve.
Lol. It's not that bad. How can you claim a hiccup could bring down "such a fragile system" when the pandemic caused inconveniences and elevated prices. Sure you wouldn't able to buy toilet paper and meat disappeared from the shelves for a few months, but you have to remember we actually shut down the ENTIRE economy, and now we're back with a few things still out of whack.
These shortages are also primarily due to behavioral shifts which redundancy will not correct. Demand for suburban housing skyrocketed since no one wanted to live in the city. Services spending shifted to goods. Global travel halted. Everyone wanted to redo their flooring in the same 3 months. Everyone stopped buying cars, and now everyone wants one to get out of the house or for that new home they bought during the pandemic. I mean, you could pay up to hedge against all of these, but I'm pretty sure 40 years of hedging would have not been a wise investment.
Now I do agree with creating redundancies for critical goods as a hedge against geopolitical tensions, but that's a different story.
Conversely I think the pandemic showed how robust supply chains are. Supply was able to be rapidly reallocated to different products with nothing more than some mild hiccups. The price of cars went up 20% or so, PS5s are hard to find without paying scalpers, and toilet paper is more expensive, but cars, PlayStations, and toilet paper are still being manufactured. Car production went down but electronic device manufacturing as a whole increased. Clothing manufacturing decreased, but mask and PPE production increased 100 fold, as did medical devices and medications.
Also this is a big opportunity for the economy. There's big demand for lots of stuff and companies around the world are scrabbling to adjust. There's also plenty of capital around to invest in them. People are now used to tightening their belts a bit, more picky about their jobs and more willing to embrace change. I think many workers have a good chance to benefit in all this.
I agree COVID seems like more of a counter-point to the idea that supply chains are incredibly fragile.
But who shut down their entire economy? The US laid off maybe a little over 10% of the workforce at its maximum, by the looks, so that's not entirely shut down even at maximum hyperbole.
Of course the “entire” economy wasn’t shut down. But the unemployment rate would have been massively higher than it was had the government not stepped in with loans (essentially grants) to encourage companies to keep people on the payroll through the lockdowns.
There were also companies that kept workers on the payroll despite being essentially shutdown for weeks even without access to PPP money.
> Of course the “entire” economy wasn’t shut down.
That may seem obvious to you and I. Hence my question.
> But the unemployment rate would have been massively higher than it was had the government not stepped in with loans (essentially grants) to encourage companies to keep people on the payroll through the lockdowns.
Would it? What models showed that, and how much higher is massively?
> There were also many companies that kept workers employee on the payroll despite being essentially shutdown for weeks.
>That may seem obvious to you and I. Hence my question.
I think it seems obvious to everyone, and anyone saying the entire economy was shutdown was just being hyperbolic. Everyone who lived through it knows that they were able to buy groceries and that their power and lights stayed on.
>Would it? What models showed that, and how much higher is massively?
Something like 12 percentage points according to this paper [1].
>There were many companies that that stayed open.
Right. But my point is that unemployment rate isn't everything when discussing what percentage of the economy shutdown. Many people were receiving paychecks despite their company being essentially closed for business.
So in summary the entire economy was not shut down no matter how grandiose and exaggerated the claim, not when you are trying to use it to substantiate an argument.
The shutdown was an order of magnitude smaller than the entire economy.
What alot of observers do not grasp, this is a system, which when it starts oscellating, sings itself apart.
Example?
A chip shortage will make modern agrarian equipment in poorer countries more expensive, leading to disrepair (Remember the right to repair discussions) aka reduced production, leading to goods shortages, leading to unrest, leading to refugee waves and more strain on the supply chain in seemingly not adjunct sectors like textile.
We didn't shut down the entire economy. Huge portions of essential workers remained employed throughout, and lockdowns were phased, plus tons of commerce went online. A true economic shutdown would look far worse than this, imagine no hospitals, no grocery stores, no utilities, no stores or services. That is far worse than our partial hiccups here and there.
I say this because the virus could've been 5X more lethal and to young people to boot. Then we might have actually truly shut down, and we'd be in a much worse spot now. There's no rule that the pandemic virus doesn't have to be much more lethal next time.
That's not true at all. There's no reason something can't be more lethal and more virulent.
Ebola is spread by contact, not in the air, so it's not a good comparison. (Especially because it can spread very quickly even given that it doesn't spread through the air.)
It would be much easier to identity an infected individual for quarantine if a virus had a steep fatality rate, the transmission would be much slower too since dead people don't travel.
Viruses tend not to work like that because to effectively spread via respiratory droplets and aerosols they require a high viral load in the respiratory system. This generally causes symptoms.
I’m sure it’s not completely impossible, but neither is a massive radiation burst from a nearby supernova.
Many experts accept that viruses evolve to be less lethal, and more infectious.
“I believe that viruses tend to become less pathogenic,” says Burtram Fielding, a coronavirologist at the University of the Western Cape, South Africa. “The ultimate aim of a pathogen is to reproduce, to make more of itself. Any pathogen that kills the host too fast will not give itself enough time to reproduce.” [1]
That same article though says it's tough to generalize evolution. It's possible something could evolve to be more lethal and more infectious. However, that's not in the best interests of maximizing the survival and reproduction of the virus, and that is what evolution typically selects for.
How long with that take? One of the excuses last summer from many Covid downplayers was the exact same sentiments and then along comes the Delta variant in October 2020.
There is no hard and fast rule that a virus will evolve to be less lethal or/and less infectious, just a noticeable downward trend in other instances. Well I'm still waiting for a downward trend even with the vaccination efforts.
Just because they tend to move towards less lethal doesn’t mean they never can go the other way, as evolution is not a plan or choice. Something increases lethality but extends overall illness time, increases transmissibility, increases asymptomatic time, or a combination would outcompete other less lethal versions. While, in the long run, a less lethal virus would be more beneficial to the virus, that wouldn’t stop a more lethal version from burning through a population until it dies out by destroying its own habitat.
Get rid of 'price gouging protection' and simple economics will make businesses put back in supply redundancy.
The issue today is it's more profitable to sell at rock bottom prices 95% of the time and be out of stock 5% of the time, then it is to sell at a higher price always (to pay for the buffer).
Selling at rock bottom prices 95% of the time and high prices 5% of the time (to pay for the buffer) is best, but currently illegal.
I don't think it's that bad but you are right. One big problem with capitalism and the free market is that people are really overdoing it with efficiency and optimization.
I once read an article with the thought experiment about what we should do if the productivity in everything we do doubled. We would have twice as much table salt. So what do we do? Well there are two options. Keep the table salt just in case. Downsize production immediately and use the spare capacity on something else.
The funny part in economics is that most of the time the "something else" is unemployment and so many economists believe that this is a good thing. Fans of the gold standard will talk about how you are supposed to suffer through the bust while forgetting that gold mining picks up and saved the day so many times even though it is wholly unproductive.
I think it's the same with everything like agile software development etc. There are some ideas with some good parts, but the way people end up applying them can cause a lot of problems. People should understand the domain, do risk analysis, change management etc.
For example car companies are suffering from chip shortages. Maybe they should have stockpiled more? But on the other hand, the "parts bin" is the worst obstacle preventing innovation and integration in established manufacturers. Why do new companies like Tesla have way less electronic parts while legacy manufacturers have lots of separate boxes and wiring, all reducing reliability, increasing cost, space and mass. Because for a legacy manufacturer it makes more sense to use the same parts from the "parts bin" as for their previous model - it's just cheaper and faster, the supply chain already exists.
https://www.youtube.com/watch?v=ZRkm6-bBk4U
We are rediscovering the eternal tradeoff between efficiency and resilience.
Market competition can only work if there is sufficient independent suppliers in the market that a failure of one of them can be absorbed by the buffer expansion capacity of the others.
Drop below that and the efficiency gains of the market killing inefficient competitors are lost due to a shortage of supply.
Something no one has mentioned is that following American sanctions on Chinese companies, those companies stockpiled an enormous quantity of micro chips of all kinds. Maybe they are still doing it. They want to insulate themselves from further chip supply problems, that created chip supply problems for everyone else.
Honestly given the situation, I think the disruptions we are experiencing are actually quite small. I'm surprised, impressed even, by the reliability of our house of cards.
I used to work in supply chain logistics. Boy howdy, I am not surprised by any of this. Most companies (especially the older and more established ones) have zero visibility into their supply chains. Suppliers don't share this information without a lot of arm-twisting.
It's very much like being in dependency hell, except that the dependencies themselves are also in dependency hell.
Edit: Shoutout to sourcemap.com, who are trying to solve this problem!
Composition of microservices doesn't have to be untyped, it just almost always is in the current ecosystem. There's always an implicit contract in place between the services, and there's no reason that contract can't be encoded in types on both ends.
(I agree in general that microservices aren't all they're cracked up to be, but lack of typing isn't an inherent flaw in the concept.)
Yes it could be fixed, but even then I don't think it is worth it.
The early language designers too got excited at the thought of generalizing subroutines to be able to suspend and resume rather than return once (especially before the call stack, where activation records are naturally ephemeral), but this was wisely abandoned.
Later we see much interest in actor models, and they too are disergonomic, and a skeuomorphism from planning people.
What's important is note the nodes, but the dataflow between them: programming is plumbing not connecting increasingly complicated pipe fittings. Most people get this dead wrong, and microservice are just the latest misunderstanding. All it has over the others is the unhealthy synergy with Conway's law.
Covid was just the finger on the trigger for the whole world's loaded footgun. Excessive interdependency and each new generation of the managerial class keeping things lean to look good on paper has landed everything up shit creek. Idle hands were justifying paychecks.
I've seen companies go from doing everything in house to outsourcing everything. It was ugly before covid, but now it might be sinking the ship. They used to retain the necessary talent, keep a stock of necessary $THING, and get things done on time and on budget. Now the MBA's see a way to cut costs on paper but it all ends up late and over budget. On to the next ship for them after this top heavy piece of shit sinks.
I'm sure there's a careful business calculus for not bringing people up from the bottom but goddamnit I used to see results, and happier coworkers.
Not just death. If you have severe illness but survive, you're likely to have continued health problems for life. And even if it doesn't hit you, you might bring it home to someone you care about.
The death toll and consequences of widespread long covid (and consequences of much more rapid mutation and the collapse of the medical system) would have caused significantly more economic damage than the lockdowns.
> I'm sure there's a careful business calculus for not bringing people up from the bottom
Not defending the practice (it's always seemed a no-brainer to me that investing in your team is better in the long run than to outsource) but I think I see the logic. Outsourcing, like renting equipment, lets you scale faster with less capital and reduces your exposure to sudden downturns in sales. It's a superior strategy if you have only an extremely limited ability to predict your market (whether because your market is highly volatile, or because you're bad at forecasting.)
Back when we used to see those results and happier co-workers, it was accepted that it would take 10-20 years to properly establish and build a business. There was none of this crazy pressure to gravely over-extend from day 1 in an attempt to unicorn out before you turn 40.
I don't understand why this problem would be self-perpetuating. It seems to me that if the cost to ship items rises, that would incentivize investment in building more containers, deploying more ships (perhaps converting abandoned cruise ships into container ships), paying dockworkers extra overtime, etc. Why doesn't the price system end up correcting all these issues?
However, one thing that is easily missed is how shipping lines have been operating at a loss/narrow margins for years, e.g., Hanjin bankruptcy: https://www.wsj.com/articles/south-koreas-hanjin-shipping-fi.... Many of the major shippers are not interested in building out capacity right now (e.g., Maersk CEO has consistently messaged this: https://splash247.com/if-msc-ends-up-having-more-capacity-th... ). It makes sense: why would they when they know that inevitably shipping rates will fall and they will have excess capacity on their hands.
Instead, they are essentially adopting a wait and see approach. In the meantime, shipping customers pay more, the shipping companies strengthen their balance sheets and reward shareholders with fat dividends, and finally demand will settle down naturally.
Reminds me of the US-based mask manufacturer who refused to scale up in the early stages of the pandemic, citing previous times he'd done so only to be left in the lurch when demand dried up. His main point (IIRC) was the strong conflict between the moral imperative and economic incentive.
There is no moral imperative for an individual company to risk their survival because society does not want to pay. If society wants something, society should pay for it. Surely there was a number the US government could have offered the manufacturer to make it worth their while.
And it looks like that's 100% what has happened to US based suppliers of surgical masks and N95s. A lot of them are having trouble marketing their higher cost masks now that the main suppliers (3M etc) have been able to catch up for the healthcare market, and there is a flood of consumer grade surgical and KN95s from overseas.
I think we've crossed a complexity threshold beyond which there are systemic problems whose solutions cannot be expressed in terms of price alone. It's like we're trying to implement factorial in morse code--it's just not the tool for the job.
For instance, maybe Alice wants $5 worth of some resource, and she'll be sad if she doesn't get it. Bob wants $5 of the same resource, and when he gets it he'll put some plan into action that makes $100 worth of some different resource available to Charlie. The price system doesn't give a reason to break the tie in Bob's favor. It's up to Charlie to notice the hazard before the transaction occurs and give Bob a dollar to tip the scales in his favor--which is a challenging trick to pull off in a world that thinks that price alone should do the trick.
No it's not up to Charlie to help Bob. It's up to Paul to come in and fill the gap that Alice and Bob are both missing. Price is enough I would argue, what's missing is that there are unknown constraints that are inflexible. I'd posit its something put down by government but anything is possible.
Coming up with enough resources to satisfy both sides of my dilemma resolves it for now, but it doesn't really address the fact that our expectations about markets' fault tolerance were wrong and probably will be again.
That said, my solution is equally unsatisfying. Saying that we should reconsider our assumptions about markets isn't the same as providing an improved set of assumptions.
Price-gouging laws artificially suppress the profitability of being the only supplier in a crisis. So it's not worth building your systems with the capacity to do any of that stuff.
I agree. People simply do not accept that it costs more money to get off the beaten path. For example, it is very cheap to build a mold that produces 10000 plastic parts. It's very expensive (per part) to use a high end 3D printer that costs hundreds of thousands to make a one off part 5 times for an emergency.
If there is only demand for 10 machines but you need 11 machines in case of an emergency then the 11th machine will have to recoup all of its costs during the emergency. That's extremely expensive but consider this: the machine is paid off and ready to deal with a second emergency.
Because real life stuff is not made of Docker containers that can be deployed in a matter of minutes.
My company does test hardware for manufacturers. We have multiple project we're working on currently but we can't finish some of them simply because we can't get all of the components we need. Because of that these manufactures, can't produce their widget, because they can't test them before shipping. They are some of the biggest corporations in the world and even they can't help us get some of the stuff we need. If they can't get their widgets produced, companies that depend on them can't produce their widgets. If you go deep enough you will find out how everything depends on everything else.
Widget 1 is not being produced because it's missing Widget 2. Widget 2 is not being produced because it's missing Widget 3. Widget 3 is not being produced because it's missing Widget 1.
I'm sure dockworkers are earning plenty of overtime. But building more containers and converting cruise ships into container ships is time-consuming and extremely expensive, and the costs don't go away when you're done. You may or may not be able to offload them when the shock goes away and you don't want to permanently incur an operational cost increase in maintenance and storage to take advantage of a temporary price bump.
And for all we know, shipping companies are taking measures like this, but making more container ships doesn't just happen. I don't know nearly enough about ships to know if it's even possible to convert a cruise ship to a container ship, but at bare minimum, you'd need to remove all of the above-deck amenities and cabin space, and maybe that requires less time than building a ship from scratch, but it still requires time. It requires hiring people who live near your dock to do it. It requires getting trucks to haul off all the waste you're generating. It requires metal recycling or waste facilities to have the capacity. It requires space at the dock to park a ship while you disassemble it. How much time does it take to get all that in place? How much expense? At least in the short run (but short possibly meaning a few years here), this would cause more shortages, as existing capital, space, and labor was repurposed to building new capacity rather than keeping the existing pipes moving.
I'm pretty sure when Powell says inflation will be transitory, he means that inflation will spike and then subside to normal, positive levels. He's not saying inflation will be higher than desired, but then will drop below the intended target. So yes, prices are not coming back to pre-covid levels, but the current inflation spike should ease next year.
Now, I'm not saying I personally believe that, but I see a lot of folks twisting his words and it's getting tiring. Happy to be proven wrong if someone can show me a quote from him where he contradicts my interpretation of his comments.
Central banks do inflation rate targeting. So for them "inflation" is the speed of inflation.
Why do we not have price level targeting aka perfect price stability? (targeting the CPI index to always be at 100) Because we don't have negative interest rates.
A slow down in the rate of inflation is considered disinflation.
Yes, because it goes (made up numbers) from 2% to 5% and the back to 2%; it was only momentarily 5%, it was transitory, and it passed.
If you're driving through some country roads at 60mph you might have a transitory period where you pass through a 30mph section by some little hamlet; when you resume 60mph you're behind schedule (if you planned not expecting the 30mph section) sure, but you're still moving at 60mph again.
yeah i know what transitory means but if supply chains are going to continue to have issues than the prices will continue to increase… and printing money will only make it worse since it adds demand but doesn’t help supply
I know it has been discussed somewhat in the past...but I still struggle to get "contact lens solution" in my country(South Africa), which is basically "sterile saline". One of those things you thought you will never have a problem of getting.
I am struggling to find what an average person with a bit of excess money that goes into saving can do when we are faced with higher than normal inflation. I was a kid when hyperinflation happened to my country in Eastern Europe and it was devastating for my family. Hopefully something like this won't happen, but then what should we do if in the next few years we are hit with inflation at the ranges of 10% to 15%? Maybe I should just accept that it is out my control and focus on my work and personal development so I can find a job in any market condition.
Not necessarily! Pretty sure you don’t have to be accredited for this: https://www.acretrader.com/ (edit: yikes nvm that’s false for now, but they say they plan to open the platform to non-accredited investors)
The traditional advice is to buy assets, like investments, real estate, valuables, objects, things that require money to buy but hold their own value over time. I don't think we'll reach hyperinflation, there are supply chain issues that will be solved over time here. I do think that education and healthcare have been inflating for years, there's definitely some shadow-inflation that hasn't been measured fully.
same situation. My grandparents sold their farm in 1988 with a very nice house (for the era) and a year or two later, by the time they wanted to buy a flat in the city with that money it was barely enough for a used car.
We've experienced systemic supply chain disruptions (mainly commodity electronic components) as early as 2016/2017, and they never really recovered. It's not just COVID or automotive or any other single factor, although it have gotten worse across the board. Now you can have problems sourcing thermoplastic resins or even certain sizes of self-tapping screws.
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