41 ms·

What caused all the supply chain bottlenecks?

• spookthesunset 5y 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?
  • allturtles 5y 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 5y ago
      Tesla's California factory was shut down for 2 months.
    • zamadatix 5y 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.
      • allturtles 5y ago
        Much of the problem with understanding what GP means is that 'the shutdowns' is a very hazy term. Implicit in the comment seems to be the idea that there was some small set of authority figures who decided to shut down the global economy and if only they hadn't done that things would be better. e.g., The induced demand from work from home you mention I wouldn't count as part of any 'shutdown' at all. It has been largely driven organically by the decisions of individual firms and workers. My office was ordered to work from home by company HQ, not by any government authority, and at this point staying WFH is an individual voluntary choice. Does this count as part of the 'shutdown'? Certainly my sector of the economy (software development) was not shutdown, quite to the contrary.
        • zamadatix 5y ago
          I'm not sure the comment is implicit of who did the shutdowns but even taking it as so the widget orders by the 10s of thousands I referenced were mostly public school systems receiving mandates and associated COVID relief funding to compl,y not private enterprises. Particularly younger grades weren't normally assigned personal hardware and not every child had internet access at home. Though like you say the private sector remote work shift certainly happened too and exacerbated the ordering situation.
          • allturtles 5y ago
            Sure, many (most?) schools went remote, but they didn't shut down, and they aren't really integrated into the "global economy." It's certainly true that collectively, society pushed down in some places and things popped up in others, sometimes in obvious ways (going remote creates demand for laptops and cameras and office chairs) and sometimes in surprising ones (spiking rental car prices, yet internet providers were totally unfazed). I don't think "if only we hadn't been so foolish as to shutdown a large part of the global economy" is a useful or helpful way to think about these phenomena, though.
  • hoppyhoppy2 5y 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.
    • polote 5y ago
      At least now we know that public health care experts cannot be trusted to make predictions
    • celtain 5y 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 5y ago
    The TX Winter Storm and Big Freeze did more damage to the TX economy than the shutdowns. Try again.
    • hosteur 5y 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.
      • erosenbe0 5y ago
        When analyzing the storm I'm not clear are we talking about the power grid alone or the normal organic effects of Texas just not operating well at those temperatures and pipes bursting, frost heave, exposure deaths, etc?
      • JaimeThompson 5y ago
        Gas producers not having themselves marked as critical infrastructure so ERCOT would not kill power to them and the failure of plants to winterize themselves are self-inflicted.
  • numpad0 5y ago
    A lot of people alive and not dead
    • silent_cal 5y ago
      Sweden
      • elsonrodriguez 5y ago
        What about Sweden? https://ourworldindata.org/explorers/coronavirus-data-explorer?zoomToSelection=true&time=2020-03-01..latest&facet=none&pickerSort=asc&pickerMetric=location&Metric=Confirmed+deaths&Interval=Cumulative&Relative+to+Population=true&Align+outbreaks=false&country=SWE~NOR~FIN https://ourworldindata.org/explorers/coronavirus-data-explor...
        • rajin444 5y ago
          That's not a fair comparison. Most covid deaths are from those already past the average life expectancy. There's a very good chance they were going to die soon anyways. Not to mention you have to account for cancer patient + covid, etc. https://www.reuters.com/article/us-health-coronavirus-europe-mortality/sweden-saw-lower-2020-death-spike-than-much-of-europe-data-idUSKBN2BG1R9 https://www.reuters.com/article/us-health-coronavirus-europe...
          • MisterBastahrd 5y ago
            It's completely fair. There's always a cause of death, and averages aren't indicative of individual cases. If an old person gets shot by a gun tomorrow, we don't chalk that up as "well, they had their time."
        • deleted 5y ago
          [deleted]
        • silent_cal 5y ago
          Compare it to UK: https://ourworldindata.org/covid-deaths https://ourworldindata.org/covid-deaths
  • pdabbadabba 5y 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.
    • fullstop 5y ago
      People working from home increased demand for microphones, web cameras, office chairs.
  • fullstop 5y 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_ 5y 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 5y 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-coronavirus-pandemic-nursing-homes-512cae0abb55a55f375b3192f2cdd6b5 https://apnews.com/article/new-york-andrew-cuomo-us-news-cor...
      • AnimalMuppet 5y ago
        Which was insanely, criminally stupid, and absolutely contributed to a lot of deaths. But New York also has a subway system that (approximately) everyone uses to get around. That turned out to be a perfect spreading ground for a respiratory virus. If I understand correctly, that's a big part of why New York got hit so hard. You can't just pin it on Cuomo's criminal irresponsibility.
    • fidesomnes 5y ago
      this is how effective propaganda works
• nso95 5y ago
  Was there a point in history where we could handle something as big as covid and without supply chain issues? Skeptical..
• nidhalbt 5y ago
  An overall valid argument, but there are also other vantage points to consider. Take for instance providers' backlogs. Anyone having studied process scheduling knows how the size of your tasks, precedence, interruptibility, number of processors, and scheduling algorithm make a huge difference. The covid disruption affected all those factors.
• neves 5y ago
  I liked this tweet of the thread: "Almost nobody has any employee loyalty because they haven't been willing to take care of their people through thick and thin of business, and thus they can't staff up quickly to meet surging demand. All businesses now complain about employee loyalty, but have we earned it?" It's hard to find someone loyal to their employer. The only loyal low level workers that I know they work in the public sector or NGO. Is this a usual feeling in other countries?
  • nuerow 5y ago
    > All businesses now complain about employee loyalty, but have we earned it? I'd say that business schools have been for the past few decades teaching that management has to be outright militantly hostile towards any employee, going through great lengths to work them to death and drop them at the drop of a hat. Thus, these people have been leading by example on how everything and everyone is replaceable, even creating and validating the temp agency industry as a legitimate employer, and once the lessons on how everyone and everything is replaceable are applied by employees towards employers... We have a crisis?
    • vietthan 5y ago
      it's weird but the military got it. Soldiers fight for their brothers or ideology, not for the brass.
      • neves 5y ago
        They also aren't fired (pun intended!) due to a slight economic downturn.
      • nuerow 5y ago
        > it's weird but the military got it. Not really. The US military is renowned for providing soldiers with a social security safety net that's unthinkable for the US's general population, encompassing healthcare, higher education and even social services.
• macrowhat 5y ago
  Democrats, duh. They want you dead.
• pradn 5y ago
  Why is there an expectation that the consumer goods economy will be robust to a once-in-a-100-years global pandemic? It's a nice property to have for sure, and we should plan for it from a public health and governance point of view. But should we expect consumer good production to be robust to such a major event? Yes, some people are seeing sofas take months to come in, and books are taking longer to be produced (there's not enough supply for the books of the latest Nobel winner, for example), but these are not necessarily necessary goods. Food and other necessary ingredients of a normal life seem relatively okay. But I am in a little bubble, like everyone else. When everyone is going through pain, people don't put too much blame in one person. If every country is losing people to the virus, people seem willing to not punish a government that loses a lot of people. If every company is suffering from supply-chain issues, wall street will not necessarily put special onus on a particular company, saving a company's leadership from embarrassment. That said, certain sectors do seem to be hit - Apple's recent miss vs Microsoft, for example.
• amai 5y ago
  In short: over optimization. In ML we fight this with regularization and dropout. However I‘m not sure how to transfer these ideas to economics.
• deleted 5y ago
  [deleted]
• Spivak 5y 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 5y 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 5y 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 5y 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 https://youtu.be/Lx8gMBJBlP8
  • deleted 5y ago
    [deleted]
  • nostrademons 5y ago
    It was predicted by a lot of people with experience in supply chain management or business. https://en.wikipedia.org/wiki/Bullwhip_effect 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.
• 1970-01-01 5y ago
  Alternate: https://threadreaderapp.com/thread/1453753924960219145 https://threadreaderapp.com/thread/1453753924960219145
  • rdiddly 5y ago
    Thanks, I hate when people try to blog on Twitter.
    • deleted 5y ago
      [deleted]
• cmenge 5y 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.
  • CamperBob2 5y 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.
    • cmenge 5y ago
      Agreed, good point. I should have said "we have been faring relatively well [so far]"
    • WesolyKubeczek 5y ago
      Just you wait until China pulls a Crimea on Taiwan. There go our semiconductors, this time for real.
      • nebula8804 5y ago
        Well at least we will be going back to writing everything in C and squeezing everything out of our old legacy chips because what else can we do? Maybe the Intel/IBM/Globalfoundries fabs in the US can continue producing whatever last gen chips they are capable of.
    • jollybean 5y 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..
• Dumblydorr 5y ago
  Is Twitter the best place for such analyses? They're stream of consciousness sentences and paragraphs, not cohesive narrative essays.
  • occamrazor 5y 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.
  • dredmorbius 5y ago
    When developing ideas, tootstorms offer some advantages. https://news.ycombinator.com/item?id=28970983 https://news.ycombinator.com/item?id=28970983
  • refurb 5y 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.
  • deleted 5y ago
    [deleted]
• Mikeb85 5y 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 5y ago
    There are plenty of things, they are just stuck on boats off California.
    • deleted 5y ago
      [deleted]
    • Mikeb85 5y ago
      There's a shortage of many things that aren't on boats off California as well.
      • giantrobot 5y ago
        The goods stuck on ships waiting to be unloaded don't help the overall situation. Containers sitting loaded on ships and ships waiting in an anchorage are containers and ships that can't pick up newly manufactured items elsewhere.
  • callmeal 5y 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/ https://www.shmula.com/the-bullwhip-effect/310/
• flyinglizard 5y 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.
  • erosenbe0 5y 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?
• tgb 5y 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.
  • philwelch 5y 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.
    • tgb 5y 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.
      • philwelch 5y ago
        I’m not sure that’s always or necessarily true. The variable costs will go down over time if there are process improvements, but eventually there are diminishing returns to those. Meanwhile, the cost of materials and labor could rise.
        • tgb 5y ago
          Sure it's not 100% of the time but that's besides the point still. Isn't NIFO a bad fit for the times when per-unit costs are decreasing? And since this happens fairly regularly it seems like a bad choice period, or at least not obviously better than FIFO or LIFO.
  • 5y ago
• 55873445216111 5y 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.
  • onion2k 5y 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.
    • Dylan16807 5y 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?
      • depaya 5y ago
        Couple of things to consider: Many of the processes might require the product is pushed and/or pulled through the machinery. If there is no material behind to push it could cause problems within the machines. Once the continuous process is broken it needs to be restarted somehow. Depending on the type of production this could be days or weeks of work just to rethread all the material through the machines and getting it going.
        • Dylan16807 5y ago
          I'd certainly rather rethread than rebuild.
• CalChris 5y 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 5y 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 5y ago
  Ongoing related thread: An unexpected victory: container stacking at the port of Los Angeles - https://news.ycombinator.com/item?id=29026781 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 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 https://news.ycombinator.com/item?id=28957379 - Oct 2021 (265 comments)
• sadfev 5y 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 5y 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 5y 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.
  • bluetwo 5y 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 5y ago
      What do you mean - How are they different?
    • analognoise 5y ago
      As they constantly and insufferably tell us. Whether we believe them is another matter entirely.
    • jonny_eh 5y 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.
  • simonh 5y 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.
    • SkittyDog 5y 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 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.
• andrewstuart 5y ago
  Queue dynamics. Late entrants to a backed up queue take exponentially longer to service.
• motohagiography 5y 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.
  • deleted 5y ago
    [deleted]
• flurie 5y 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 5y ago
    Yeah, when they get public bailouts.
  • whatever1 5y 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 5y ago
      It would impact Apple's ability to raise money on the stock market tho.
      • whatever1 5y ago
        Banks are in the business of giving loans and they pay professionals to evaluate the assets of borrowers. That is in contrast to me and everyone else who just gamble collectively.
      • jen20 5y ago
        It would also mean Apple have to radically restructure the compensation of many of their corporate employees to remain competitive.
      • 5y ago
• hprotagonist 5y ago
  https://en.wikipedia.org/wiki/Beer_distribution_game 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".
• mrkramer 5y ago
  Long story short: Big spike in demand in a very short period of time.
  • Mountain_Skies 5y 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.
    • mrkramer 5y 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 5y 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-victory-container-stacking-at-the-port-of-los-angeles/ https://thezvi.wordpress.com/2021/10/28/an-unexpected-victor...
  • _ph_ 5y ago
    Does it invalidate the message, if you tell it well?
  • nostrademons 5y 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.
    • starky 5y ago
      Exactly, I think the most succinctly way I've heard it put is, "Everything is Marketing"
  • BoiledCabbage 5y 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.
• nimbius 5y 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.
• xondono 5y 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 5y 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.
    • School-Cotton 5y 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.
      • p_l 5y ago
        Or maybe people will look into how those that shutdown more severely avoided the problems.
• joe_the_user 5y 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.
  • stainforth 5y ago
    B) Buyers are not willing actors
    • chii 5y ago
      Why is that? they arent forced to "buy" at gunpoint.
      • mdtancsa 5y ago
        I great term I came across in the retail gas industry is "hostile purchase"... as in no one "wants" to buy gas in the sense that you wake up one day and think "Oh boy, I can hardly wait to go out and get some 87 octane today" and after the purchase, "wow, that was awesome gas!"...
• hk1337 5y ago
  What's the deal with writing 20+ consecutive tweets instead of a blog post and tweeting the link to the blog post?
  • dragonwriter 5y 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 5y ago
      I clicked a link to get to this twitter feed monstrosity.
      • t-writescode 5y ago
        A large percentage of TypeFast's twitter followers won't.
  • malfist 5y ago
    Worse, 20+ tweets that don't provide any more nuance than the original tweet, so this literally could have been one tweet
  • coolso 5y 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 5y ago
    Blogs just aren't that popular anymore, so maybe he doesn't keep one and Twitter is his main outlet?
  • deleted 5y ago
• president 5y ago
  Is anyone honestly surprised? Seeking short term gains has been the story of the last decades.
• deleted 5y ago
  [deleted]
• jshen 5y ago
  Absolutely shocked that a founder of a new company believes that founder led companies are the simplistic solution to our complex problems.
  • rytill 5y ago
    On one hand, people say what benefits the position they're in. On the other hand, people enter positions they believe will benefit them.
• patrickyeon 5y 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 5y 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 5y 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.
    • spiralx 5y 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-successful-companies-are-employeeowned.asp 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.
• ltbarcly3 5y 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.
• a-dub 5y ago
  opening titles and music q: what caused all the supply chain bottlenecks? a: the pandemic. cue outro next week: opening titles and music q: should we have done anything differently? a: probably not. that would be really expensive and pandemics are pretty rare. cue outro
• snowwrestler 5y ago
  Mandating a lower-than-maximum container stacking height was itself a buffer, which is now being filled by temporarily stacking higher. The idea that we run without buffers in the supply chain is contradicted by his own big idea to use one of them. We don’t have big warehouses full of inventory sitting around like we used to, true. But we do have the money we generated by running more efficient supply chains, and money is more flexible than outdated inventory. Edit to add: whether that money is sitting with founders, shareholders, or employees is largely irrelevant from a macro perspective.
  • ARandumGuy 5y ago
    Money doesn't do you much good if you can't actually spend it on anything. Getting rid of warehouses full of car parts to save some cash doesn't do a lot of good when no one can sell you car parts for any price. Buffers won't solve a long term shortage, but they can prevent a short term shortage from cascading. When the entire global economy is running with minimal buffers, then the effects of supply disruptions can last years, and that problem can't just go away by throwing money at it.
• jollybean 5y ago
  It's fallacious to suggest that 10% capacity everywhere would have abnegated the supply chain issues. That said, shipping in particular is problematic in how they externalize costs. They can get away with shenanigans because they use international loopholes etc.. I say we need to dump this 'flagging in exotic country ABC' and require that any ship landing in country ABC has to abide by all the regulations of ABC.
• throwaway4good 5y ago
  What it is the alternative to the current just-in-time regime? Warehouses filled with stuff to be sold. Overproduction. Stuff getting destroyed because it expires or cannot be sold for whatever reason. We may get there, hopefully only temporary, as a reaction to the current situation. For most companies, the amount paid to the factory in China or elsewhere, is only tiny fraction of the price the product is sold for. That is why companies now are double or even triple ordering. Most of that stuff will just ending up getting destroyed.
  • Clubber 5y ago
    Companies should stockpile where they are most vulnerable. I'll give an example. I make (assemble) my own bullets (cartridges) for target shooting. There are 4 parts: primer, powder, bullet and casing. The casing is the most resilient because I can pick them up and reuse them. The bullet is probably the second most resilient, because in a pinch, I can get molds and pick up and melt down lead and make them. The powder is also pretty resilient because there are multiple manufacturers and all kinds of powder per manufacturer that would work, I would just have to adjust the drop (amount) for the new powder. Primers are the least resilient, because it's hard to replace and also competing manufacturers who make pre-assembled cartridges also need them, so I would certainly make sure I had plenty of those. Of course, even with all that, there's no way of knowing how long the shortage will last. We're going on a year plus now, and who would have anticipated that?
  • p_l 5y ago
    Well, Overproduction is a problem when you make big batches and then need to store them. A lot of "inputs" outside of food production can be stockpiled reasonably longer, so without breaking with JIT/Lean philosophy all you need to do is to create a bigger buffer at the start of the value chain, which might mean that missing X deliveries won't stop your production rate instead of 1 missing delivery stopping the whole factory.
• alex_young 5y ago
  E-commerce did it. We operated with little head room in a very very big system for a long time without these issues, and the major change was online shopping, which really took off during the pandemic. This worked, mostly because there was suddenly slack in the system to accommodate this changed purchasing pattern, caused by a slow-down in practically everything else. Now that the everything else is back online though, there is massive contention for space on ships etc, so retailers hoard more in warehouses, and that backs up into container yards, and then into the parking lot at the dock. Adding more capacity in the middle (stacking some containers) doesn't do anything to materially solve this problem. https://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf https://www.census.gov/retail/mrts/www/data/pdf/ec_current.p...
• WesolyKubeczek 5y ago
  All nice and logical, and the stark lack of long-term planning is a huge part of the problem, but this: > Only founder led companies and family owned businesses can stand up to the immense pressure from the dogmas of modern finance. This observably does not compute. Unless those family owned businesses are the size of Samsung or comparable, they can rarely afford to invest so much in their prime, much less so now. Founder-led and family businesses seem to be the huge collateral damage in this clusterfuck. Or am I wrong? Are those businesses not hit with transportation growing expensive AF and energy shortages just as bad? Do they have enough lobbying power that their government simply will not let them drown one way or another?
• kwertyoowiyop 5y ago
  The interconnected supply chain is a headache right now, but on balance it’s still a good thing for the world if it prevents some country from starting a global war.
  • Mountain_Skies 5y ago
    The global interconnected supply chain is a relatively recent phenomenon. It's far too early to make any claims about its ability to prevent physical war and so far seems to have created the necessity for fiscal and cyber war.
• tyrfing 5y ago
  I think this misses a lot. I suppose it's because it has to support the pro-billionaire-founder conclusion. First: monetary policy. This was half the shock, not just the pandemic - it was on a scale similar to World War II. In hindsight, you can say that the pandemic was a signal to increase production, but that's a bit ridiculous. If vaccines took longer, if governments didn't spend more than WW2, we would be in a much different situation. Not to mention all the retail bankruptcies that happened anyway. Second: structural changes in the labor market. Huge numbers of Baby Boomer retirements [1], for example, which disproportionately affect the sorts of manufacturing and transport jobs that are relevant here. Third: operational effects. Lots of spare capacity can mean operating at normal rates after accounting for things like social distancing, quarantines, and government forced shutdowns. Examples include mass factory closures in Vietnam the last few months, huge outbreaks at meatpacking plants, forced quarantine of air crew, and Amazon employees waiting taking 20-60 minutes to pass screening before work. 1. https://research.stlouisfed.org/publications/economic-synopses/2021/10/15/the-covid-retirement-boom https://research.stlouisfed.org/publications/economic-synops...
• maxerickson 5y ago
  Large businesses had a great pandemic, so it doesn't kick off to a real strong start.
• dpierce9 5y ago
  The average lifespan of a company is 10 years.[0] The average lifespan of companies on the S&P is maybe a little more than twice that. Each year you have a 1/100 chance of seeing a hundred year flood. With a short lifespan the odds are decent that your company simply won’t see one. The question is then: how good of an idea is it to spend to be robust to them? Of course it is viciously circular: planning to not be robust to white swans is probably why the lifespans are so short and shrinking. Tim Cook doesn’t have voting control of Apple but it is sitting on a massive shock absorber made of cash earning insanely low rates of return. The idea that you need control of the board to be robust doesn’t seem to be necessary. It is probably helpful but it isn’t necessary. [0] https://www.sciencedaily.com/releases/2015/04/150401132856.htm https://www.sciencedaily.com/releases/2015/04/150401132856.h...
• dpierce9 5y ago
  The average lifespan of a company is 10 years.[0] The average lifespan of companies on the S&P is maybe a little more than twice that. Each year you have a 1/100 chance of seeing a hundred year flood. With a short lifespan the odds are decent that your company simply won’t see one. The question is then: how good of an idea is it to spend to be robust to them? Of course it is viciously circular: planning to not be robust to white swans is probably why the lifespans are so short and shrinking. As for the turn to founder control, one counterexample is Tim Cook who doesn’t have voting control of Apple but is sitting on a massive shock absorber made of cash earning insanely low rates of return. The idea that you need control of the board to be robust doesn’t seem to be necessary. It is probably helpful, apple may be sui generis, but it isn’t necessary. [0] https://www.sciencedaily.com/releases/2015/04/150401132856.htm https://www.sciencedaily.com/releases/2015/04/150401132856.h...
  • collinmanderson 5y ago
    It probably helps that Tim Cook had a lot of supply-chain experience before he became CEO. They also ship their phones from China by air rather than sea. I duck-duck-go'd for a source and happened upon this article from 2015 :) https://www.flexport.com/blog/does-apple-ship-iphones-by-air-or-sea/ https://www.flexport.com/blog/does-apple-ship-iphones-by-air...
  • Gigachad 5y ago
    It should all come down to a cost/risk/reward/importance factor. If you are a bakery that sells very close to 100 loafs a day, you would want to make about 100 per day. Some event happens randomly and you have demand for 400. You could call it a supply chain failure or you could call it a success to turn away 300 customers once a year vs throwing out 300 loafs every other day. At the end of the period, all of this redundancy spend gets binned so you gained nothing from it. Some essential services like healthcare could make sense to spend extra on redundancy since turning away 300 "customers" is a lot more serious than not getting your loaf or gaming pc.
    • Spooky23 5y ago
      I literally worked this scenario. We procured extra proofer and oven capacity as compared to what we needed daily. The cost was marginal, there was some labor cost savings (less cleaning) and added resilience. But on those busy days, the store would turnover 4-5x when competitors were out of product.
• Azsy 5y ago
  The RoE analysis is decent, but it wouldn't be HN if every now and then someone really wants to sell the idea that your average business owner and your average S&P 500 business are all in this together with taxes as their enemy. Taxes don't apply equally. Taxes are a good thing. Taxes can work.
• DevKoala 5y ago
  > Only founder led companies and family owned businesses can stand up to the immense pressure from the dogmas of modern finance. > The proposed tax on unrealized capital gains will force founders to sell larger and larger pieces of their companies to pay the tax, until eventually they lose control of their businesses and turn them over to the Wall Street sharks to run their disastrous playbook. I agree with this argument. Love him or hate him, with a tax on unrealized capital gains someone such as Elon Musk would not have been able to drive Tesla to profits thus forcing the automotive industry towards EV's. Moreover, we would have fallen behind decades in the space race.
  • dragonwriter 5y ago
    > Love him or hate him, with a tax on capital gains someone such as Elon Musk would not have been able to drive Tesla to profits thus forcing the automotive industry towards EV's. Yes he would have. One, because there is a tax on capital gains, and he did; you probably mean an unrealized capital gains tax, but... Two, it is quite possible (and explicitly a motivation of the proposed law, so impossible for any honest critic to overlook) to borrow against public tradable assets, and if they are gaining value fast enough that a 20% tax on unrealized gains would significantly erode your holdings you can do so at interest rates far below the value growth, essentially without limit (that's how people fund lavish lifestyles without taxes on unrealized gains already), so he would be able to use that method to pay taxes without any dilution of ownership.
    • DevKoala 5y ago
      You think he would have doubled down on the risk? Perhaps, but I know it would have been another obstacle in the road for him. At what point does it stop being worth it for him? I do not like his social media antics, and hate to even bring him up as an example since I am tired of hearing of him. However, the guy works like a madman for goals that mainly benefit all of humanity to whom he owes nothing. History will look kindly on him and down on all of us that did so much to hold him back. Edit: thank you for pointing out I missed the "unrealized" bit.
• wonderwonder 5y ago
  What I am curious about is if the unrealized gains tax will lead to more and more company boards being run by massive retirement / hedge funds such as black rock. All these companies will then be essentially forced to the ROE / share price over all model as all the BlackRock's of the world care about is share value because that's what their customers want from them. When that scenario is combined with a massive economic shock, what happens?
• dragontamer 5y ago
  Anyone who has played Factorio knows that "just in time" is far superior to actually holding reserves. If you buffer things up, you don't know where the problems in your production are. People are saying "why didn't we buffer up more" ? Well, there we go. Play Factorio. You'll see just how bad buffers are in a simulated factory.
  • dpcx 5y ago
    I haven't played Factorio, so maybe I'm missing something... but if you don't have buffers and suddenly whatever that produces something essentially goes away, what happens to all your just in time pieces? Seems pretty certain that they'll all end up idle.
    • dragontamer 5y ago
      Yes. Iron mines run out in Factorio. That then causes the player to search for new sources of iron to fix your supply chain issue. ----------- In contrast, if you buffered up... you end up running out of Iron 10 hours ago. Then your buffers deplete and you're back in the same position, except you've built out your supply chain to be even more fragile than before (because you had an additional 10 hours of expansion).
      • ravel-bar-foo 5y ago
        That's because you're not setting up alerts to warn you when your buffers are depleting. In a simple system like Factorio, adding a buffer to catch oversupply should never stop production more than not having a buffer at all. (A related problem in Factorio is that the available buffers tend to fill themselves based on the topology of the belt network rather than actual oversupply, and then tend to not empty into where they are needed until the logistics network is developed. In the real world there are price signals and communication between factories, so supplies are not allocated to factories on a first-come first-serve basis (inserters serving themselves).
        • dragontamer 5y ago
• legitster 5y ago
  No, no, no! Stockpiling is not a solution to a bottleneck! In the grand scheme of things, having a couple weeks of extra inventory on hand will not help you weather a 100 year storm. But it will increase waste - inventory that you have to throw away when there are defects or when they become obsolete. Imagine trying to predict the run on lumber, and the solution was to have kept a bunch of lumber sitting in yards rotting waiting for the off-chance that there was a sudden unexpected demand. The proposal that we should have been shipping over more of everything, building giant strategic stockpiles across the country of everything, and then tossing out 10-15% of everything from storage loss is bonkers. Just In Time manufacturing reduces waste and improves quality across the board. And stockpiling only hides your bottlenecks!
  • modeless 5y ago
    > In the grand scheme of things, having a couple weeks of extra inventory on hand will not help you weather a 100 year storm. That's not really what he's saying. It's not about a single company, it's about the whole economy. When every company is running JIT, a small temporary supply disruption anywhere can bubble and propagate through the whole chain, becoming a huge disaster. It's like a traffic jam; when a highway is running right at capacity it only takes one person hitting the brakes to turn the whole thing into a parking lot. Except it's worse than a linear highway because the economy has many backlinks where companies early in the chain rely on companies later in the chain, causing feedback loops. Whereas if there was slack in the system then the relatively small initial shock wouldn't propagate.
    • legitster 5y ago
      Supply chain issues were sooo much worse before JIT. Imagine one person taps the brakes, but every car weighs 100 tons. When companies kept huge inventories, most of it was not useful to solve the supply chain issues that came up and often made it harder to respond to demand shocks.
      • notacoward 5y ago
        [citation needed]
• rossdavidh 5y ago
  Nassim Taleb calls this fragility vs. "antifragility". A system with frequent small shocks, gets information from those shocks about what to keep buffers of. A system without an absence of frequent, small shocks, keeps no reserves (like the bones of an astronaut in weightlessness too long becoming thinner, or the muscles of someone who does not work becoming smaller). Small shocks are information, and they tell a system what to bulk up on. Long periods of tranquility, leads to fragility. Which, for many reasons (climate change? war? pandemics? disruptive technologies?) is not a good preparation for the near future.
• ryanmercer 5y ago
  No. My industry (international freight) is hemorrhaging people left and right in "the great resignation", COVID outbreaks at ports and facilities have been shutting specific facilities down on and off for almost 2 years, cargo containers aren't moving from ocean ports because there aren't any chassis to be had, Suez canal, weather, etc. etc. , so on and so forth. Not "Return on Equity".
• nojito 5y ago
  This tweet storm is largely nonsense. For example: >The proper way to do accounting is Next in First Out (NIFO). This means you price your goods against the cost of replenishment. NIFO isn't GAAP which is why it's largely pointless.
• three14 5y ago
  Why would you expect a company that pays for buffers to be able to compete with a company that doesn't, even if the first company is owned by benevolent founders? Shouldn't the company that's cut inventory to a minimum be able to charge less than the competition, and drive the high-inventory competition out of business? I understand that not having inventory might create long-term problems, but how is the high-inventory company supposed to compete during the good times?
• KingMachiavelli 5y ago
  How bad are the supply chain bottlenecks really? Compared to the amount of discussion on the matter they seem pretty minimal outside a couple sectors. I certainly don't see any lack of products being sold at grocery and big box stores. The only exception I see are some hot items like GPUs and game consoles but I don't they the supply chain itself is the constraint but rather the actual silicon. The only significant example I can think of is the car market. If you sold or didn't have a car pre-pandemic then getting one now is going to be expensive both new and used. Then again I have scene dozens of used cars sitting in parking lots (w/o license plates and with old car rental decals) so I'm starting to think there is some scalping going on in that market as well.
  • Baeocystin 5y ago
    About half of the bog-standard IT gear I normally buy is months+ lead time if I need that specific part. I can usually find a workaround, but it's often ugly. Don't look at the man behind the curtain swearing in the racks. I had hoped that by now things would have eased up, but if anything it is worse than the start of the year.
  • NeutralCrane 5y ago
    I went for a flu vaccine at CVS this week and the person giving it to me explained the process would be a bit different because they were using much larger needles than usual. I asked why and they said it was due to supply chain issues. While it effectively didn’t change much for me, it also was easy to see that with a bit more pressure, some pretty critical supplies could simply not be available in sufficient quantities.
  • starky 5y ago
    Raw materials are seeing issues, which is trickling down to nearly everything. Metal costs have gone up >25% from what I've seen, plastics are nearly impossible to get from the large suppliers, etc. Many electronics components are majorly supply constrained right now, is isn't just silicon components, passives also have shortages everywhere.
    • 5y ago
• josh_today 5y ago
  Covid gave governments in free markets the ability to control capitalism. The outcome is a less efficient supply chain. Very simple.
• chiefalchemist 5y ago
  What comes to mind is The Big Short. That is, following the herd - to the point of negligence - is an advantage, until it's not. Where and when did Wall Street and Finance get the reputation as geniuses? What's so genius about rubber stamping herd mentality ideas? That aside, have there been any winners? Companies or industries that were less RoE driven? Or does the economy completely lack "bio" diversity?
• zelon88 5y ago
  I worked at a company who made products on contract, but the contract stipulated the vendor we had to use to get the raw materials. The raw materials were just aluminum castings, but they were a custom shape specifically for this customer of ours. They could only be used for this one product. I noticed that the inventory levels of our vendor were dropping, but we weren't buying. Meaning our customer was ordering the same product from a competitor. I proposed that we spend the money to buy the rest of the material at the vendor. Basically denying our competitor the materials and forcing either them to come to us or the customer dropping the order and reordering through us. This would have been a risk because that's about a year supply of proprietary castings that we can't use for anything else, but I really thought it was a worthwhile opportunity. But it went against lean principles so we didn't do it. Fast forward 6 months and our competitor basically did the same thing to us.
  • TheRealDunkirk 5y ago
    You describe microscopically what's happening macroscopically: The US is experiencing runaway consolidation and monopolization in every market sector. It is the business plan of every VC-funded startup discussed on this forum to monopolize a market and extract ALL the profit from it. The excess capacity of every supply chain in the entire country has been liquidated for short-term profit over the past decade, and then COVID happened. No one seems to be calling out this behavior, so I expect it will continue.
  • herendin2 5y ago
    Game theory. If the idea occurred to you, then one can almost guarantee it will eventually occur to others - and to someone at your competitor. With that understanding, there's only one rational course of action: to secure your supply before they do, and your competitor realized all this. The only real decision to make is whether to risk the more aggressive move of also locking up your competitor's supply.
    • etripe 5y ago
      Based on their example, in practice the decision is between dealing with reality and following management framework dogma at all costs. Game theory offers amazing insights, but it doesn't really deal with internal company politics, the power of business consultants and the desire to obtain silver bullets. Could it be that quarterly/annual budgets make one assume participation in a finite game, rather than infinite? That's precisely the kind of thing the author of the tweet chain seems to be describing.
• aaron695 5y ago
  I like the way how he explains how I still have more stuff available to me during a fucking global pandemic than my parents ever had in normal times, let alone the grands but it's still a troubling "supply chain bottleneck" that's about three letter acronyms something something. I think it's a good test run for a time of war, or ultra serious pandemics. And we did fucking well. Also a good thing to bring up the next time some trashy moron talks about how on Twitter they read about oversupply of food in the West and how it's bad.
• yalogin 5y ago
  What? This turned from a supply chain to don't tax the rich post. I completely disagree with it. A good CEO will be able to do both look at the long term and deliver shareholder value. Yes, the growth could be slower but it is on the CEO to convince the board and investors that its a good thing. Either way, now that this issue is front and center, CEOs will not be blamed for planning ahead, so we can happily tax the rich? His logic not mine.
• tome 5y ago
  Ah, another chance to plug my article about why he was wrong about the bottleneck at the ports! https://news.ycombinator.com/item?id=28987281 https://news.ycombinator.com/item?id=28987281
• intricatedetail 5y ago
  In my country mostly legislation that taxes small business on revenue even over 50% effective rate and prevents from claiming legitimate business expenses. That wiped off thousands of HGV drivers working through their own small business. They got also smeared by the government as tax dodgers without showing any proof that this was ever the case. They of course blamed that on Brexit.
  • rsj_hn 5y ago
    That's interesting -- do you have a link for some background information?
    • intricatedetail 5y ago
      https://www.rha.uk.net/News/News-Blogs-and-Press-Releases/Blogs/Detail/articleid/445 https://www.rha.uk.net/News/News-Blogs-and-Press-Releases/Bl... More detail, but that's a propaganda article.
      • rsj_hn 5y ago
        Thank you. I don't mind reading propaganda -- people can advocate for their cause.
• IronWolve 5y ago
  This is also why cyber security and infosec has been avoided, ceos don't want to spend the money, until something bad happens and they have no choice, and then its way more expensive to fix after the intrusion.
• chernevik 5y ago
  Lean manufacturing isn't just about minimizing book inventory and cash tied in inventory. It helps keep production flexible and responsive, and helps identify bottlenecks and inefficiencies. And it reduces risk -- a car manufacturer holding several months of chips is going to lose that investment every time its chip stock gets obsoleted. I expect that increasing buffers of material work in progress to levels indifferent to the current mess would be very expensive, very risky and have all sorts of secondary effects.
• rsj_hn 5y ago
  This is like a Rorschach test. There is truly something for everyone. What caused all the supply chains bottlenecks? Hard Left: "It's the fault of *capitalism*!" Hard Right: "It's the fault of *unions*!" Soft Left: "Truckers don't have a living wage!" Soft Right: "We stopped producing because of lockdowns!" Greens: "It's *climate change* disrupting the economy!" Libertarians: "*Government mismanagement of ports!*" YIMBYs: "*Zoning laws don't allow stacking!*" De-regulators: "*AB 5 bans independent operator trucks!*" Taleb: "Globalization JIT is *too fragile*!" Krugman: "Republicans destroyed our infrastructure!" Montana: "Workers are staying home, collecting unemployment!" (h/t tamaharbor) Did I miss any explanation? I need to start collecting these. Full Disclosure: I have no idea what the causes of the port bottlenecks are, but it's a great launching pad for talking about all of these issues.
  • tamaharbor 5y ago
    Staying at home and collecting unemployment.
    • rsj_hn 5y ago
      Yes! I have definitely heard that one, too. I will update the list.
  • Aloha 5y ago
    So real answers - It's not just the port mind you - the whole logistics system is straining. Broadly, too few workers to move too many things and a heavy reliance on "just in time" manufacturing techniques. Like the ports are just one component of the issue, so are labor shortages at domestic manufacturers, overseas manufacturers, disruptions from COVID, and all of these things interplaying with one another. We went from a self optimizing system, that had some risk of someone having too much of something, to a highly optimized system where there was no slack in the system - largely in the name of saving money - if there is less inventory on the shelf, there is less sitting on the balance book, and less that needs financing. Furthermore moving the kind of manufacturing overseas that we have, has increased fragility, both because because it adds obvious choke points - and because it's components that we've moved, so now the ports break down, and it takes 4 months to get a new car.
• jkingsbery 5y ago
  For an alternate take, see https://www.nationalreview.com/2021/10/the-real-culprit-in-our-supply-chain-crisis/ https://www.nationalreview.com/2021/10/the-real-culprit-in-o... ... These posts raise some interesting points I hadn't thought about (I don't see any problem with Next-in accounting). But it seems that lack of inventory isn't the only problem, throughput at ports is also an issue, and the ports themselves are limited at what changes they can make to fix these issues, partly due to profits (no one will want to operate a huge port that's profitable 5% of the time), but also partly due to limits put on ports and shipping by the government.
  • deleted 5y ago
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• Barrin92 5y ago
  It's true but just looking at supply chains or 'the economy' misses that this isn't just how we do business, our entire culture runs on fumes. People during the pandemic didn't just learn that their toilet paper is delivered just on time, people learned that's how their friends and family are organized. The amount of people who were basically alone during the last two years with no actual communal support if there even is still such a thing as a community at all was staggering. The founder of flexport thinking that giving founders more control isn't exactly surprising but misses the point that the problem he's talking about has already infiltrated just about everything.
• lvl100 5y ago
  Current supply chain model is largely based on the likes of Walmart. They are also the company that pushed to manufacture goods in China. Walmart destroyed the rust belt. Walmart destroyed small businesses across the country. Walmart is the reason why US middle class got screwed. Walmart is the reason why we saw unabated rise in China. Walmart is boomer legacy.
• tester756 5y ago
  Why is Flexport lately popular on HN?
• advael 5y ago
  I make my living predicated on the assumption that digital optimizers over loss functions have practical value, but seeing a pretty terrifying meta-pattern where defining and then subsequently obsessively optimizing and inevitably gaming metrics will burn away basically all of the useful parts of most human institutions, as we see in nearly every kind of business as noted here, as well as government endeavors like education, I'm pretty close to genuinely believing that quantifying success and trying to optimize over a metric is something human institution should literally never do, which is a weird place to be
• Trias11 5y ago
  Doesn't Let's Go Brandon's vaxx mandates contributing to the problem?
• 01100011 5y ago
  Isn't sort of foolish to expect companies to do anything but play by the rules of the game which are defined by their stakeholders(customers, partners, suppliers) and the government? You can rant all you want about things companies should do, but if they're rewarded or incentivized towards bad behavior then that's what you'll get. Companies may increase their buffers for a while, but the market will punish them and they'll move back towards their pre-covid behavior in short order. You can write all the blog posts you want about it, but without incentives and rules nothing changes.
• cbdumas 5y ago
  All of this talk about supply chain issues are totally missing the point in my opinion. So many articles (and tweet chains I guess) have been written about supply chain issues, yet every one of them seems to ignore the elephant in the room which is demand for goods vs services. Over the course of the pandemic there was a staggering re-balancing of consumer spending [0] from services to goods, to which supply chains have not caught up. If the spending doesn't re-balance again as restrictions are lifted this is not a temporary supply chain issue caused by just-in-time methodology, it's just the new normal. [0] https://apps.bea.gov/iTable/iTable.cfm?ReqID=19&step=2#reqid=19&step=2&isuri=1&1921=underlying https://apps.bea.gov/iTable/iTable.cfm?ReqID=19&step=2#reqid... EDIT: That link is broken, should have been this https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=3&isuri=1&nipa_table_list=63&categories=survey https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=3&isuri...
  • markjspivey 5y ago
    what you describe is still an actual supply chain issue though, you are merely elaborating on a possible cause for particular supply chain issues .
  • HWR_14 5y ago
    > yet every one of them seems to ignore the elephant in the room which is demand for goods vs services Considering almost every article I read about the causes cites the shift from services to goods (to the point of feeling like it's filler at this point), I wonder how we are reading such different sources. I'm thinking about sources like the NYT.
  • FranksTV 5y ago
    Another missing piece is that COVID is still thriving in a lot of places, and typically in the places that are the "supply" in supply chain. So while the demand is waking up there are still a lot of places with large numbers of people sick and/or dying because they don't have wealthy governments who can afford mass vaccination.
  • rossdavidh 5y ago
    The reason just-in-time is to blame, is that JIT assumes you have a reasonably stable flow (yes, I worked in manufacturing where we studied JIT a lot). Yes, it was a shift from services to goods that provided the current shock, but it was JIT that meant the system could not adapt to shocks. If you have no buffers (or very small ones), then you cannot quickly adapt. If you put a vase on top of your car and drive away, it's irrelevant which bump in the road causes the vase to fall off; it was bound to fall off eventually. The global supply chain was optimized for efficiency, to the point of fragility, and whether it was a pandemic or a war or something else, a shock was coming eventually. With climate change, we can expect more frequent weather-induced changes in the future. A supply chain which cannot handle frequent, large changes is too fragile, and that's what's wrong with JIT.
• deleted 5y ago
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• Ericson2314 5y ago
  Wow started decent and then went full stupid. We can't go back to earlier capitalism anymore than we can go back to feudalism. Regulate minimum buffers, or create a state-run rail and warehousing system like industrial Amazon. It's a natural monopoly and much more efficient than a gazillion trucks.
• leoc 5y ago
  Lean consultant Darrell Mann on "Dodo-Lean": https://darrellmann.com/dodo-lean/ https://darrellmann.com/dodo-lean/
• crmrc114 5y ago
  From my time in manufacturing I can also say there is a cult of 'lean development'/'Toyota Production System' almost always done wrong and removing any backup buffers for long lead time parts. The fact that my home state billed us an Inventory tax on items we had on the shelf further pushed the business to keep inventory as slim as possible.
• scottcodie 5y ago
  He's talking about risk, thats all. "obsession with "Return on Equity."" is just high risk tolerance in CEOs. He states that Founders are more conservative than hired CEOs, which seems like an excessive generalization. He clearly misunderstands the relationship between accounting and pricing goods. Companies price goods to maximize profits. I doubt companies routinely try to pay extra taxes to make their accounting books look better. Companies still try to pay as little tax as they can. Maybe they do it when they hit an IPO to get a better initial prices but usually more goes into valuation of a company than their GAAP accounting sheet. The only good point he almost touches on is determining who should bear the risk on a 100 year flood event, the company or the consumer. With JIT, the consumer bears more risk in the supply chain. It's not seen if this is actually a bad thing. Lastly, his whole shtick seems to be centered around being against the billionaires tax. Sorry Ryan Petersen, Founders don't provide extra stability to the supply chain because they are more conservative.
• freeopinion 5y ago
  Small nit: NIFO is another word for price gouging.
• laserlight 5y ago
  > Just in time everything. No excess capacity. JIT requires excess capacity by definition. Response time of a process running at 100% utilization is unbounded, which is the opposite of JIT.
• unethical_ban 5y ago
  Here is the tweet thread in a more accessible format. https://threadreaderapp.com/thread/1453753924960219145.html https://threadreaderapp.com/thread/1453753924960219145.html
• 11thEarlOfMar 5y ago
  On the other hand, sometimes, it's straight ahead bad luck. A chip we use in one of our products is made in a semiconductor fab in Malaysia. It's the only place in the world that makes the chip. That fab has been shut down for about 6 months as the nation struggles with COVID. In the meantime, the inventory in the supply chain, and even customer warehouses, has been picked clean by brokers to be re-sold for high-cost applications like cars and industrial equipment. We've paid as much as $15.00 for that $0.47 chip. One broker offered them for $50.00. We haven't found any in more than 2 months.
  • HarryHirsch 5y ago
    It's the only place in the world that makes the chip. Back then we had second-source agreements. What happened to that concept?
    • 11thEarlOfMar 5y ago
      We don't buy enough chips to compel Infineon to build another fab. Usually, we manage end of life matters with last time buys, etc. But this wasn't an end of life situation, and frankly, was not anticipated. To solve, we'd need to design alternate chips for all that are used, which is not economically feasible at this point in the product's life cycle (now 20+ years).
  • robomartin 5y ago
    If you post the part number someone might be able to help you.
    • notacoward 5y ago
      More likely, another HNer who knows of a supply will use that information to "hustle" their way into a bigger profit. I'd strongly advise against sharing the part number.
      • robomartin 5y ago
        Glass half full vs. half empty? While I agree with you in general terms, I still prefer to think people, at a fundamental level, are good and like to help each other. Yes, I know, silly.
• fjbfjbfjb 5y ago
  LET'S GO BRANDON! LET'S GO BRANDON! LET'S GO BRANDON! LET'S GO BRANDON! LET'S GO BRANDON! LET'S GO BRANDON!
• robomartin 5y ago
  I propose YC create a series of clases on business and economics. Every time I read through a business discussion on HN I cringe. The lack of understanding is, at times, astounding. And yet everyone thinks they "know" what's going on and base a bunch of conclusions and opinions on exactly nothing. Sometimes I wonder how it is that people rationalize having these opinions and reaching these conclusions when it is obvious they have not taken a single business class and they have never run a non-trivial business. I hate to bring-up Dunning-Kruger. Yes, I know, some call it controversial. OK, I won't. I'll call it "talking out of your ass". Because, frankly, to someone with real business experience, this is almost exactly what it all sounds like. People talking about stuff they know nothing about. Not sure why some feel compelled to do that, yet, they do. If you are a software developer, imagine someone posting a bunch of opinions on a relevant subject and you instantly knowing they have no clue what they are talking about. I don't know, scaling Django. Pick anything you really know and imagine a person "talking out of their ass". Well, that's what it looks like in these business/economics discussions most of the time. You can count the number of people who actually know what they are talking about with one or two hands most of the time. The rest is noise. I don't know where it comes from, but it is in a range between funny, silly and sad.
• xbar 5y ago
  No. The bottleneck was the 3 hour boat tour. Imagine how much time we could have saved if we had just cut to the chase? Also, he took a real Gilligan's Island risk just going out on a 3 hour boat tour. We could still be stuck and he could be stranded on a desert isle somewhere in the South Pacific.
• tmellon3 5y ago
  The elephant in the room is simply hoarding tendancy. See a video of a scientific study : https://m.youtube.com/watch?v=3AhSNsBs2Y0 https://m.youtube.com/watch?v=3AhSNsBs2Y0
• tmellon42 5y ago
  The elephant in the room is simply hoarding tendancy. See a video of a scientific study : https://m.youtube.com/watch?v=3AhSNsBs2Y0 https://m.youtube.com/watch?v=3AhSNsBs2Y0
  • deleted 5y ago
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• jasonhansel 5y ago
  > The proposed tax on unrealized capital gains will force founders to sell larger and larger pieces of their companies to pay the tax, until eventually they lose control of their businesses and turn them over to the Wall Street sharks to run their disastrous playbook. Are the billionaire founders actually better--on a societal level--than the "Wall Street sharks" he's complaining about?
• orasis 5y ago
  Efficiency is better for the environment than stockpiling.
  • tonyedgecombe 5y ago
    Not always. Jevon's paradox shows that as you increase efficiency the lower costs can increase overall consumption. https://en.wikipedia.org/wiki/Jevons_paradox https://en.wikipedia.org/wiki/Jevons_paradox
• web2sucks 5y ago
  It’ll fix itself because capitalism will find a solution to bring prices down.
• antonzabirko 5y ago
  There are no bottlenecks. Just bad planning and cost-cutting that resulted in lack of goods.
• deleted 5y ago
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• starky 5y ago
  This is maybe half right. The demand for short term maximization of profits over all others is really driven by being a public company and shareholders only being satisfied if they see gains that exceed the market even at the detriment of the long term viability of the company. The US stock market is better at accepting risk of than my country (Canada) where companies are really harshly punished by shareholders if they show any signs of reduced profits/revenue. Keeping inventory down is one easy way to maximize the profit as you aren't accounting for unused inventory. While it is correct that this is risky in case of supply chain bottlenecks, holding lots of inventory isn't a good solution either, because the company is now holding the risk of unsellable inventory should there be an economic downturn and people aren't buying your goods. Either one could easily sink a company. I don't have a great answer, but after what has happened over the past year, I think the solution has to involve manufacturing be better distributed throughout the planet. You greatly reduce the chances of "once in a century" events preventing your shipment of product if you can shift production elsewhere and rely on a distributed supply chain. This would be better environmentally as well as it would require significantly less shipping if things were manufactured near where they were consumed. The costs of implementing this and the complexity for companies to manage is just too high for this to practically happen.
  • dismalpedigree 5y ago
    If you think public markets are bad at creating poor long term incentives (they are) you should see what private equity does. 10x worse.
    • stingraycharles 5y ago
      It highly depends upon who’s behind the private equity. As an anecdotal example that always stuck with me, Google post-public very quickly became a very different company, much less principled and “don’t be evil”. Yet they did have private equity. I think they key difference is that you can choose to a reasonable degree who your private investors are, where there is no such option with public investors, and public markets tend to be more hostile.
• deleted 5y ago
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• typ 5y ago
  I thought maximizing ROE is rather 'old-school' nowadays. Most businesses I know tend to strive for growing market share and revenue. They are even willing to run the business in the red for that.
  • monocasa 5y ago
    I've only seen that in businesses without inventory in the first place.
• throwaway984393 5y ago
  Of course there's no cash on the balance sheet. If you leave it on, your competitor won't. I don't know why people continue to believe there's an invisible economist in the sky making sure that your economy will always be healthy as long as the market can do whatever it wants. Or, perhaps we're just looking at it the wrong way. Nature has epidemics, hurricanes, droughts, forest fires. Maybe a recession every 20 years is an economic forest fire clearing away the dead brush, and a collapse of global infrastructure is just a global logistics drought. Sure, companies collapse, people's lives are thrown to the wind. But nature's cruel, right?
  • blitzar 5y ago
    There is no punishment for having zero cash on the balance sheet only penalty, even in a crisis. I would love to see the corporate equivalent of a pandemic, let the weak die off and the strong continue on. Sadly that isnt what happens. The weak become zombies, propped up by government money out of fear of the weak being killed off.
• ridaj 5y ago
  This is such a lame-ass take geared towards bashing the proposed tax on unrealized gains... It's clear enough that the pursuit of ROE incentivizes stripping excess capacity in the short term. But NIFO vs LIFO accounting is a small insignificant detail of this, and the claim that founder-led businesses are fundamentally different doesn't pass the sniff test. First there are many businesses in logistics that are founder-led or privately controlled by founder families, from Walmart to Maersk. If founder control was really critical to setting up a business to weather a 100-year storm, you'd have expected the logistics industry to fare pretty well. There are also plenty of industries that had to deal with massive demand spikes and did not end up being long term bottlenecks, in spite of being pretty brutally managed by markets, like grocery supplies or telecom and internet access providers. The main difference IMO is the growth orientation. In tech there was already a large expectation of strong long-term demand growth, so there was already a structure in place to deal with capacity growth. Industries that did not have this expectation, like maritime transportation and port infrastructure, do not have the ability to start increasing the capacity on a dime. When the profit growth expectation isn't there, evidence is the private founder businesses don't invest either. I would believe the argument more of I heard a lot more of the likes of Bezos, Gates, Page, Musk etc. investing their private money into the kind of massive infrastructure upgrades needed to solve the world's logistics bottlenecks. Until then I call BS on the argument that we should just wait for them to invest their money to solve it. Governments might as well take it and upgrade infrastructure if the money's just parked. With the modern "golden share" structures, that shouldn't actually take a lot of control away from founders...
• StanislavPetrov 5y ago
  This is the inevitable result of globalization and prioritizing profits and efficiency among all else. Redundancy and reserve capacity are costly. When you create a supply chain that is designed for maximum efficiency and minimum cost, by definition you are creating a supply chain that is fragile and incredibly interdependent. This is not a system that is built to withstand serious disruption, it is a system built to maximize profits. Whether it comes to masks, drugs, food or toilet paper, I hope these supply chain issues (and resulting shortages) will wake people up to the threats we face from our fragile trade system.
• snicker7 5y ago
  Author argues that a wealth tax will encourage short-term over long-term growth. But a wealth tax is also a disincentive for public ownership. And some argue that short-term thinking prevails to satisfy the whims of the public market.
• habosa 5y ago
  He lost me when he turned the thread into a plea to not raise his future taxes: https://mobile.twitter.com/typesfast/status/1453753943092125697 https://mobile.twitter.com/typesfast/status/1453753943092125... We need billionaires like him! Not the other kind! /s
  • blitzar 5y ago
    The only thing that can protect you from a bad guy with a billion dollars is a good guy with a billion dollars.
• Animats 5y ago
  The port congestion problem comes partly from incoming traffic being up while outgoing traffic is flat or down. Port Hueneme in Ventura County, CA, is a major agricultural export port. They have enough outgoing traffic to keep full containers going out, and they're not overloaded. Nor are they choked with empties. Freightwaves has good coverage of this issue.[2] Comments from people who are working to fix the problem. There's a startup working on this, "Container-Xchange".[3] They're trying to connect people with empties with people who want containers. Their site is funny to read, because it's designed like a B2C site, aimed at a B2B industry. "100% free and no credit card required". "Grow your network in container logistics." You can just see the VC pitch deck: "Uber for containers". Their competitor, MatchBox [4], seems to be further along. At least their list of partners includes major shipping lines. But they're still thinking B2C. "5 free bookings for referring one person". What they're both trying to do is create something like the settlements system US railroads have for boxcars, which makes them mostly interchangeable regardless of who owns them. But those startups are working from a position of far less strength than the Association of American Railroads. The startups have to get container owners and users to sign up, and there are lots of players. Even then they mostly make bilateral swaps. One outcome of this empty container mess may be some major ports saying "look, you want to park an empty at this port, you have to sign up with the settlements system so we can send it out". [1] https://www.usatoday.com/story/news/2021/10/17/port-huenemeport-of-hueneme-helps-ease-congestion-los-angeles-county-ports/6097081001/ https://www.usatoday.com/story/news/2021/10/17/port-huenemep... [2] https://www.freightwaves.com/news/viewpoint-la-empty-containers-tell-a-compelling-story https://www.freightwaves.com/news/viewpoint-la-empty-contain... [3] https://container-xchange.com/ https://container-xchange.com/ [4] https://matchboxexchange.com/partners/ https://matchboxexchange.com/partners/
  • ralusek 5y ago
    I prefer shopping for B2C anyway, regardless of if I'm acting as a B or C. If I look at the pricing of something, and they have a "contact us" form, I leave.
• drumhead 5y ago
  I'd say he was mostly correct about the causes, but the thing to remember is that this situation is not going to be with us forever. It's going to last a year maybe two at most and then after that it's business as usual, the companies that have the least spare capacity will win out again and everyone will forget the post covid supply chain issues. So no I don't don't think we'll see much more investment in excess capacity. What it has highlighted however is the over reliance on certain geographical locations for manufacturing, especially key electronics components and the problems it caused. Expect certain items to be manufactured closer to key markets now or to be branded strategically important so that government aid can be provided to them to keep them going.
• phreeza 5y ago
  Honestly I think we have been getting through the pandemic with surprisingly little problems regarding supply chains, at least as far as I am personally concerned. Anything I have heard has been basically minor inconvenience or higher prices. I have lived in a major city when all the country's truck drivers went on strike and supermarket shelves were empty within a day. I can tell you that was an all together different feeling. Of course truckers would probably not have let the population starve, but it showed me how fragile life in a big city really is. Not getting my new car delivered on time because of a chip shortage is extremely low in the range of potential bad outcomes.
• lbriner 5y ago
  All well and good but no company ever had multiple years of stock and in most cases you had more stock of some things than others so companies might have felt the bite later but they would still have felt it.
• trentnix 5y ago
  (I'm in the USA, so my comment is in that context) It's very easy to blame this on various proxies for "capitalism" (like “return on equity”), but I think that misunderstands capitalism. It's assumed that capitalism prefers being "lean" or being "efficient" over alternatives, but it's actually circumstances that prefer being lean or efficient. And when the circumstances change (such as when disasters or war or politics disrupt the supply chain), then other strategies might be preferred. So those businesses that have excess supply or who are able to manufacture domestically (or on site!) might have the advantage. And that will help keep products available to consumers and reduce the economic shock of changes in the circumstances we find ourselves in. But when government decides to overwhelmingly favor "lean" businesses through policy, business incentives become perverted. Here in Texas, businesses pay taxes on excess inventory. Its called “Personal Property Tax” and you are required, as a retailer or manufacturer, to render a value and consequently pay a tax for all of the property the business owns at the end of the year. That includes whatever inventory or materials you might own - so whatever you might be holding for reserves or disaster mitigation. So you are incentivized to make sure, at least on Dec 31, that you have as little excess inventory and supplies as possible on your sales floor or in your warehouse. Government subsidizes overseas shipments, thus encouraging manufacturing and retail over domestic manufacturing and retail. Government makes domestic employees and manufacturing very expensive (via wage minimums and taxes and regulation and so on) but does not extract tariffs on imported goods - especially lower-priced commodities. That makes it significantly cheaper to offshore manufacturing and warehousing and take advantage of cheap (slave?) foreign labor, environmentally harmful practices allowed by foreign government, etc. Don't get confused - I'm not saying we should have no wage minimums or employment taxes or regulations. Just that the government favors manufacturing and warehousing overseas to domestic manufacturing and warehousing. So while there are circumstances that favor a business environment that is “efficient” and “lean”, there are tax and legal incentives that don't change as quickly as the circumstances do. We've enjoyed a robust, dependable supply chain and robust economic growth for a long time. Lots of bad policy has taken root during that time. That bad policy is going to impede the economy’s ability to adapt to the sudden changes we've experienced. And we will all suffer for it.
• Maarten88 5y ago
  > Washington must protect and nurture these engines of competitive dynamism, but instead they're conspiring to kill the golden goose. I was with him throughout, until this. Here it seems, also for him, his personal interest gets in the way of rational problem solving. He may be a hero for helping solve a problem, but he is still human: just another tax-exempted billionaire business owner, no problem here.
• luckystarr 5y ago
  Once a stable dynamic system goes out of whack due to capacity constraints, there is a chance that it goes into an oscillating mode, even when the capacity is returned. If this is to happen with the distribution system, we'll have to deal with the aftermath for years to come.
• baryphonic 5y ago
  One major claim of Nobel Laureate Vernon Smith's "Rationality in Economics" is "the profit-maximizing firm will fail in finite time." The book is excellent, one of my favorite econ books, and is Smith's somewhat dense but well-written explanation for and interpretation of economics. His main thesis is that "rationality" is not a "constructivist" property of various agents, being possessed by any (or every) individual separately, but is an "ecological" property that emerges collectively from e.g. the price system, organization of firms and other economic relations. His argument about profit-maximizing firms proceeds almost exactly along the lines of this tweetstorm, but goes further. Why would Wall Street want to reward companies that fail to be robust to changes? Are there other structural problems (the law? regulatory regime? bailouts? monopoly?) that cause CEOs and Wall Street actors to be collectively "irrational" as we are seeing today with JIT-everything? IMHO, the problem is political-economic. Finance has arrived at this equilibrium of asset price insanity and phony accounting because the regulatory regime and state actions as a whole (e.g. bailouts) are entirely out of whack – the system has no working feedback mechanisms at the moment, so the economy is in a real sense failing. How did the state fail? Partly in response to demands from powerful & wealthy entities on e.g. Wall Street.
  • onlyrealcuzzo 5y ago
    I think the massive difference between income and capital gains taxes plays a huge role - especially when you get into the .1% where a substantial portion of wealth and income lie. All of this funny stuff is mostly people trying everything they can to get capital gains instead of income so they can pay a 25% tax rate instead of a 39% tax rate. When you're talking about billions of dollars - 14% is a lot of money. From the perspective of the average person - the tax code probably makes sense. If you already pay 39% tax on your income, and THEN you have to pay 39% on your capital gains and half of your capital gains are actually just inflation - it's like you're getting taxed on your tax! True inflation has likely been ~4% since 2008. The S&P average is ~7.25% per year. So half of the "capital gains" the ordinary index fund investor would pay are just inflation. But the .1% are different. You don't make it into the .1% with a ~7.25% return and a laborer's salary. You need to be making ~30%+ returns for decades. Or, ~10,000% for a few years (a lot of the successful VC-funded entrepreneurs). Half of their capital gains aren't inflation. Barely any of it are. Effectively, there tax rate is ridiculous low compared to the average Joe. And what's worst - the Fed is causing so much of that inflation. Would Tesla be a $1.1T company today if the Fed wasn't pumping up asset prices, lowering interest rates, and making future cash-flows absurdly and artificially valuable? No. And yet, Elon Musk gets to make $100Bn on paper - and he can take loans against those gains with <3% interest and never pay ANY taxes. It really seems like this is a completely separate world - and it's >30% of US wealth - and it should be dealt with separately.
• dpezet 5y ago
  “Over the long run, in our complex, dynamic, power law world, the reference assets will be those companies winners willing to challenge the dogma of modern finance.” This might be the worst sentence I have ever read.