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The incentive has already been created by Covid-19 exposing the vulnerabilities and need for decentralization. Diversification will emerge such that the next ti

by shas3 7y ago

The incentive has already been created by Covid-19 exposing the vulnerabilities and need for decentralization. Diversification will emerge such that the next time there is a shock companies that diversified will survive, while others fail. Some industries will not learn because they will be bailed out, others like consumer electronics have probably already learned their lessons.

enitihas 7y ago
How will diversified companies survive till before the shock, given consumer preference for lower prices.
- notyourday 7y ago
  Less competition. Twenty years even if a company manufactured something in China the sales channel for a product was dependent on the company giving the company ability to control/level the price. Today the supplier can not only sell to the company but to the consumers directly significantly cutting company's ability to level the price so the company is forced to drop the more expensive suppliers
quanticle 7y ago
The incentive has already been created by Covid-19 exposing the vulnerabilities and need for decentralization. Diversification will emerge such that the next time there is a shock companies that diversified will survive, while others fail. There is an incentive for now. When the current supply shock goes away, the old market pressures will reassert themselves, and those companies whose supply chains are narrowly focused on the lowest-cost/highest-quality producers at the expense of diversification will outcompete those whose supply chains are diversified. The parent questioner is asking, in essence, how can we turn this incentive from a one-time shock into a continued incentive to maintain diversification? As it currently stands shocks are far too unpredictable and episodic to serve as a market incentive. In practice, people don't diversify unless there's a constant and ongoing pressure for them to do so. It's much easier and cheaper to find a good supplier and rely on them as much as possible.
asdfman123 7y ago
What I mean by incentive is the concrete, day-to-day purchasing decision incentives. I know why it might be a good idea, I just don't know how people could accomplish it.
- eru 7y ago
  Perhaps it is _not_ a good idea? We don't generally make our roofs asteroid impact proof, either.

by shas3 7y ago

The incentive has already been created by Covid-19 exposing the vulnerabilities and need for decentralization. Diversification will emerge such that the next time there is a shock companies that diversified will survive, while others fail. Some industries will not learn because they will be bailed out, others like consumer electronics have probably already learned their lessons.

enitihas 7y ago

How will diversified companies survive till before the shock, given consumer preference for lower prices.

notyourday 7y ago
Less competition. Twenty years even if a company manufactured something in China the sales channel for a product was dependent on the company giving the company ability to control/level the price. Today the supplier can not only sell to the company but to the consumers directly significantly cutting company's ability to level the price so the company is forced to drop the more expensive suppliers

quanticle 7y ago

The incentive has already been created by Covid-19 exposing the vulnerabilities and need for decentralization. Diversification will emerge such that the next time there is a shock companies that diversified will survive, while others fail. There is an incentive for now. When the current supply shock goes away, the old market pressures will reassert themselves, and those companies whose supply chains are narrowly focused on the lowest-cost/highest-quality producers at the expense of diversification will outcompete those whose supply chains are diversified. The parent questioner is asking, in essence, how can we turn this incentive from a one-time shock into a continued incentive to maintain diversification? As it currently stands shocks are far too unpredictable and episodic to serve as a market incentive. In practice, people don't diversify unless there's a constant and ongoing pressure for them to do so. It's much easier and cheaper to find a good supplier and rely on them as much as possible.

asdfman123 7y ago

What I mean by incentive is the concrete, day-to-day purchasing decision incentives. I know why it might be a good idea, I just don't know how people could accomplish it.

eru 7y ago
Perhaps it is _not_ a good idea? We don't generally make our roofs asteroid impact proof, either.