European Tribune - Community, Politics & Progress.

Resiliency still optional

by Jerome a Paris
Sun Nov 23rd, 2008 at 01:20:41 PM EST

The Economist still thinks that survival is overvalued:

Ever since the 1980s the fashion had been to make companies as lean as possible, outsourcing all but your core competencies, expanding your just-in-time supplier system around the globe, loading up with debt to “leverage” your balance-sheet. Old-style defensive conglomerates, such as Arnold Weinstock’s General Electric Company, were dismantled. Companies that hoarded cash—even ones as good as Toyota and Microsoft—were viewed with suspicion.
(...)
Rash though some of them seem today, the Western management fads of the past 30 years improved productivity (one year’s outperformance does not prove the Japanese model was right).

Despite the article being about how most corporates have been incredibly weakened by their lean-ness, how they are now fighting for their very survival, and how this will alter risk perceptions in the future, the conclusion, as flagged above, is still that efficiency is better than resiliency.

That may be true is you survive that downturn (if the damage during the short period of "underperformance" is not too extensive), but it's not quite true if you actually die in the process. It's like saying that jumping without a parachute is "more efficient" than jumping with one because you go faster most of the time - you just go slower for a very brief moment of "underperformance..."

I suppose that we have not quite hit the ground yet, so it is still possible to cling to the illusion.

Maybe it's time to sell market regulation and restrictions as insurance against damaging (and inevitable) market excesses, and tax as "premiums" for that service?

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Resiliency still optional | 17 comments (17 topical, 0 editorial, 0 hidden)

How much is market superiority (none / 1)

lined to the fact that failing companies are dropped out of stock market indexes, which thus have an embedded 'survivor bias'?

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Nov 23rd, 2008 at 01:21:29 PM EST

And how much of market superiority (none / 1)

is linked to the fact that the traders that lose money in markets and get wiped out are replaced by new generations that did not learn that lesson?

Nassim Taieb made that point in "fooled by ramdomness"

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Nov 23rd, 2008 at 01:22:30 PM EST

Re: Resiliency still optional (none / 0)

metatone was ruminating on this subject last week.

Jesus died for somebody's sins but not mine - Patti Smith

by dvx (dvx.clt ät gmail dotcom) on Sun Nov 23rd, 2008 at 01:33:45 PM EST

Re: Resiliency still optional (none / 0)

yes, I suspect there's a lot to ruminate on this topic.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Nov 23rd, 2008 at 01:59:38 PM EST
[ Parent ]

Re: Resiliency still optional (4.00 / 2)

the Western management fads of the past 30 years improved productivity

Maybe they improved monetised productivity, but it remains to be seen whether the increase in stress they caused don't mean such a loss of (non monetary) utility as to mean a decrease in actual, well, happiness. Which should be the whole point of increasing productivity in the first place.

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Sun Nov 23rd, 2008 at 01:37:56 PM EST

Not to mention (4.00 / 2)

that if it only means that task previously non-monetized now are, we have changed what we count rather than improving anything (such as childcare done by a remunerated, GDP-adding third party rather than by family or informally)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Nov 23rd, 2008 at 01:58:59 PM EST
[ Parent ]

Happiness - (none / 0)

I always respect linca's remarks - always. Maybe it's stronger than respect, because I respect most remarks here and on many other blogs. So maybe it's that I always appreciate linca's remarks.

Thomas Jefferson has a host of detractors, but I have thought for many years that his inclusion of "Happiness" in the Declaration of Independence was a master-stroke, however whimsical it might appear in such a document. The first time that I read/heard it, I was not really paying attention until that word jumped out of the text. I missed a lot of details in that first reading, because I was stuck on that word in that context.

I really, really like linca's take on things.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Sun Nov 23rd, 2008 at 08:49:56 PM EST
[ Parent ]

Well said, Jerome. (4.00 / 3)

Here's the problem - in the U.S. it's too late. We "have not quite hit the ground yet...", because the better analogy might be a 'black hole'.

The 'contradictions of Capitalism' - how I love - and fear - that phrase. Maybe it's Karma, but, here in the U.S., we are headed for redress of grievances from all sides. Market regulation and tax-based balance of wealth/power - and control of the military/industrial establishment - could probably have prevented the recent debacles that are prelude to catastrophe for many years to come. But here we are - the empire could not restrain its internal dynamics, plus we got the true 'action faction' - the Cheney gang.

I have to laugh - however ruefully - at both the incorrigible proponents of U.S.-style 'efficiency' and the naive supporters of re-regulation. Effectively, the U.S. is headed toward bankruptcy (realistically, it's already there). The closest model for the not-too-distant-future in the U.S. may be Russia in the 1990s. But in any case, after bankruptcy, it's a new game with a really diverse - and often angry - set of players.

Sorry for a rant, when I'm not currently prepared for a more objective, data-concentrated discussion. Just couldn't suppress it.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Sun Nov 23rd, 2008 at 01:59:07 PM EST

Re: Resiliency still optional (none / 0)

I think the link is not formatted quite right?

by Metatone (metatone [a|t] gmail (dot) com) on Sun Nov 23rd, 2008 at 02:25:14 PM EST

Re: Resiliency still optional (none / 0)

Fixed.

by afew (afew(a in a circle)eurotrib_dot_com) on Sun Nov 23rd, 2008 at 02:29:37 PM EST
[ Parent ]

Re: Resiliency still optional (none / 0)

Thanks!

by Metatone (metatone [a|t] gmail (dot) com) on Sun Nov 23rd, 2008 at 03:21:19 PM EST
[ Parent ]

Re: Resiliency still optional (4.00 / 4)

Strange article because in many way self-contradictory.

I mean, the word "Lean" in business context has to bring Toyota to mind immediately.
Yet they seem to count Toyota as the opposite of Lean?!?

Similarly, the last 30 years could be seen as the triumph of Japanese methods (reducing variability, Just In Time, no inventory, hunting down waste...). Yet the article concludes that we shouldn't be too impressed with Japan and rather consider the last 30 years outside Japan.
My impression is that they confused "Lean" with "in debt". "Hunting down waste" with "outsourcing everything.

I think that leanness truly helps resiliency. But that is lean à la Toyota (where the term originated). Not à la Enron.

"Few can believe that suffering, especially by others, is in vain. - Galbraith"

by Cyrille (cyrillev domain yahoo.fr) on Sun Nov 23rd, 2008 at 03:53:13 PM EST

Re: Resiliency still optional (4.00 / 2)

It is the difference that comes with having either engineers or lawyers in the top management echelons.

You can't be me, I'm taken

by Sven Triloqvist on Sun Nov 23rd, 2008 at 04:17:14 PM EST
[ Parent ]

or between (4.00 / 3)

understanding the laws of thermodynamics and understanding the "laws" of economics

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Nov 23rd, 2008 at 04:28:32 PM EST
[ Parent ]

Re: or the mathematics (4.00 / 2)

of compound interest on a money supply consisting of interest-bearing credit....

Modern conservatives engage in one of man's oldest exercises in moral philosophy: the search for a superior moral justification for selfishness.Galbraith

by ChrisCook (cojockathotmaildotcom) on Sun Nov 23rd, 2008 at 06:01:22 PM EST
[ Parent ]

or the difference (4.00 / 2)

between consumption and investment.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Nov 23rd, 2008 at 06:06:34 PM EST
[ Parent ]

Re: or the difference (4.00 / 3)

between squandering 80% of a client's capital on "investments" that can never provide a return so that you can pocket the other 20%. One example being million dollar shipping containers rotting in the desert or jungle so that "ministers" could get their "origination fee" or what ever they call it. Formely a developing world phenomena now come to the first world banking sector.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer at eurotrib.com) on Sun Nov 23rd, 2008 at 07:24:20 PM EST
[ Parent ]

Resiliency still optional | 17 comments (17 topical, 0 editorial, 0 hidden)

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