Monday, October 21, 2013

Embracing Redundancy

We've all been sold a bill of goods.

All the time we are told that efficiency, productivity and profitability are the most important things in the world. Heck, we've even folded sustainability into this model. As we continue to mix more and more ingredients into this cake we're increasingly at risk of choking ourselves to death as we consume it.

Whoa, Anon, you are going off half baked dude.

I'm afraid not. Let me dish out some examples that will help you understand what I'm going on about. As many of you will already know there are companies such as Monsanto that are locking up the worlds food supply by accumulating locked in farmers worldwide. Their profits are good. Yay, isn't that wonderful.

Alternately, most of the western world purchases food products from increasingly large operations located further and further away. We've got increasing economies of scale. Our food is grown or raised in another country. We've shaved five cents off the price of each of our meals. Hooray! The world is a better place.

We're all busy working eight hours a day, if we are lucky enough to have full employment. Our spouses are busy working too. We're all too stressed and tired to raise our children effectively. We have to do this to afford health care, education, good food and a safe place to live. Thank goodness some of our lives are going so well.

Anon, you've described a veritable utopia, what could possibly be the problem?

Yes, I know, if you buy the corporate mantra we do appear to have a utopia, for corporations. However, even these stalwarts of progress and common good for all mankind, if it generates a profit, have blind spots. What I'm talking about is risk. We've all seen risks manifest themselves recently.

Perhaps you felt the impact of the global financial crisis? If not, perhaps you've at least seen others impacted by that event? Luckily, we saw the tip of the iceberg just in time, panicked, yanked on the wheel, and avoided a directly collision. By we I mean the world. Risk is a tricky business and we aren't managing it well.

Perhaps you have noticed natural disasters happening here and there from time to time? What happens when the infrastructure is no longer available for us? How does food get delivered? How do people stay warm? How do people earn money? If they are lucky, and the disaster didn't knock out too much there will be aid distributed while recovery efforts take place. This is true in places like New Orleans, more recently New York, as well as more remote places.

Anon, are you going to let me know why you are talking about redundancy? Who cares about natural disasters?

Don't rush me, I'm getting there. First, let me ask you a few questions. What happens when Monsanto eventually releases a strain of food that has some type of unexpected catastrophic failure? What happens when a man made emergency interrupts the flow of oil and prices skyrocket for months? What happens when a single sourced item from another country is no longer available and we depend on it completely?

Let me give you a more personal example. All the food in local grocery stores arrives via trucks. If there is a hurricane and a few key roads are knocked out then there will be no trucks for some period of time. How long do you think the food will last? What if a local power plant has some type of minor catastrophe and the power goes out. If you have electric heating what will you do?

These are examples of very efficient systems that have no redundancy. We are making ourselves so efficient that we cannot handle interruptions. Companies often run on a "just in time delivery" principle in order to reduce inventory costs. Competitors merge and facilities get larger so that more customers can be served at lower prices. The economic principle of comparative advantage has companies focus on core value alone such that they cannot provide a service without a large interlocking set of other services.

Whoa, dude, don't go all survivalist on me!

Don't worry, I'm not a survivalist but I would mention that most movements have at least a kernel of accuracy under them somewhere or they would not attract followers. Survivalists are right in that we are designing inflexibility and vulnerability into our homes, our communities, our food supplies, our infrastructure our businesses and even our nations. Seeking profit is not the same as building a robust system.

Some amount of redundancy is appropriate. If I'm growing vegetables in my backyard then I might be able to rely on external resources slightly less the next time a hurricane comes through my neighborhood and takes out chunks of infrastructure. If we embrace some level of renewable energy then we might not be quite as susceptible to wild swings in energy prices due to world events.

If we ran our companies in a slightly less efficient manner, while still ensuring profitability, then we might be able to withstand interruptions in supply chains without immediately curtailing production. If we grew our food with a little less concern for absolutely maximizing our profitability we might be able to reduce our risk on one single mistake causing a massive catastrophe.

A little bit of redundancy would not hurt us. It would in fact increase chances of dealing with both man-made and natural disasters effectively.

I don't get it, what's your problem with corporations?

Weren't you listening? I don't have any problem with corporations. I don't even have a problem with profits. I'll even agree that the profit motive is indeed probably the most efficient way to apportion capital to competing uses.

I have a problem with the fact that the world has created a huge complex system that is optimizing itself for profits. There are things that the quest for profits does not take into account. For example, it might be acceptable to run a manufacturing company in North America that produces an 8% return on investment instead of running it overseas for a 12% return on investment.

I mean, we can certainly argue the economics of comparative advantage and decide that only the most advantageous efforts should be allowed. However, what happens if all out meat comes from overseas and there is a disease outbreak in the source country? Wouldn't it be great to have a reasonable sized herd somewhere else to help recover from such a disaster?

We need to have backup plans -- but they aren't efficient unless you are in a state of disaster. They will potentially impact profits and total rates of return on investment. They will also reduce our exposure to systemic risk. This risk has been slowly growing for a long time and we should think about where it is leading us.

What happens the next time there is an asteroid collision with Earth? What happens when a new volcano erupts and creates a cloud covering half the planet? What happens when there is a massive crop failure or worldwide epidemic affecting animals or humans? How are we going to deal with these things when our resources are so "efficient" that none of us know anything except our particular small slice of work and there are no "replacements" around to deal with the loss of input from affected areas.

I, for one, would like to see just a little bit of redundancy remain in the world. I also wouldn't mind a little less pressure to be more and more efficient during working hours so I could be a little more human when at home with the family. Maybe we could even employ a few more people and offer a little bit more job security.

Hmm, you might have a point, but I still think you are half baked.

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