(Vanity) Reflections on Milk and Elevators, or, The Worth of A Man

I often buy a gallon of milk at the convenience store across the street from my job, and take it up to break room to use on cereal or in my coffee. Since my office is a few floors up, I can either take the elevator (which is interminably slow) or walk up the steps (and have everyone else staring at me when I arrive huffing and puffing). I was pondering this choice on one recent trip, when I was struck by a blinding flash of the obvious that saving work is exactly what the elevator is for.

My mind raced ahead. Just think how much work is saved by the elevator; rather than having to laboriously climb untold steps, one can just press a button, and get carried up to the right floor. And the same principle applies, even more strongly, to other forms of mechanization. Just think how much labor is saved, how much more we have available to purchase, through the wonders of mechanization, of transport. Sure, we all understand milk -- cows are not kept in every back yard, and both refrigeration and transport are necessary for me to have the milk to put in my coffee. Fast food is dependent on so many things which must be transported -- cups, plastic forks, vegetables; and for some fast food chains, even the food, such as shrimp for the salads, or beef is transported a long way. I have read, for example, that McDonalds is the biggest customer for shrimp in the United States; and that some fast food chains import the beef for their hamburgers from Argentina. (Argentina? What happened to Kansas?)

And this brings up a couple of drawbacks -- well, not necessarily drawbacks, but certainly tradeoffs inherent in both mechanization and in advanced trade and in complex supply chains. First, while it is true that technology saves a lot of energy, and relieves people of heavy burdens, it is also true that technology can supplant the work of a lot of people. One would have to look a long time indeed to find "rickshaw puller" or "manual switchboard operator" in the Help Wanted section of a newspaper, or indeed on Craigslist (there goes that d@mn technology again!). But the process isn't always that simple, of manual labor being replaced by the latest technology; there are front-end costs, maintenance, and expected duration, utilization, and efficiency of the technology as well. Think of John McCain's famous $50/head lettuce, or manual vs. automated car washes. There is often a tradeoff not of lower costs for higher, but one of a different type of costs, of costs being spread over more accounting categories, or the creation of entirely new types of costs altogether.

And a similar tradeoff can be seen, perhaps even more clearly, when the subject is offshoring -- the substitution not of machines for brawn, of computer logic for human drudgery, but of one group of (usually lower paid!) people for another. Offshoring has made many promises, from lower salaries, to versatility (the labor supplying firm is supposed to keep a flexible staff, hiring, laying off, or backbenching people with skillsets as the necessity requires), to 24x7 seamless operation ("when it's night here, it's day over there so work can continue while you sleep, shortening vital cycle times"). This would all be well and good, except that so many of the promises go unfulfilled. Due to the business lemming effect^TM, once a large number of North American and European businesses began sending work to remote locations, wages went up, and skillsets often went down. Due to cultural and language differences, often extra time and effort (requiring meetings at odd hours) became necessary to nail down specifications, to present additional Quality Testing, to expensive and schedule-slipping reworks. Again, the promise has often been different from the reality.

Does all this mean to imply that I am a Luddite, or (knee-jerk accusation) racist? No, it only means that in business processes, as in consumer purchasing, the correct motto is still caveat emptor.

But there is yet another caveat besides the obvious ones which have been seen in practice, and have been discussed above. One of them has to do with existing customer bases. The process of offshoring in particular has often been sold as an opportunity for companies to increase their profits drastically, by finding a painless way to market to "the long tail" of the relatively economically disadvantaged. Why, just *look* at all the near-subsistence Third Worlders out there: if we could create a Middle Class out of them, why, they sky would be the limit! (I have actually read with my own eyes what amounted to marketing copy justifying the outsourcing of IT functions to India, on the grounds that the programmers hired in India would then be able to afford to buy Western products such as Gillette and Coca-Cola. Tactfully left unmentioned is the extreme drop in buying by the poor schmucks left unemployed over here. Wait, what? I thought that the IT jobs were the miracle jobs of the future to employ those who had been left behind in the pell-mell rush to send all of our factories to Mexico and China. Oh, that must have been a prior administration's lies. And I'm getting ahead of myself. Never mind!)

But here again, as with mechanization the sizzle is not always the same thing as the steak. For some products, there are additional costs and risks incurred by creating the product overseas and shipping to the United States -- say as in clothing, where the transit time by ship requires additional lead time, and consequently a greater risk to changes in the market. And there is another problem with the "growing external markets" so beloved of those selling the practice of offshoring: many times, whether due to cultural differences, or parochial preferences, or other reasons as discussed below, markets for US goods overseas do not open up to the extent promised. It is true that China buys a large number of GM cars; not so much India, which is moving forward with trying to export the Tata: which both confounds growth strategies in India, and may act as a competitor for US goods in other low-cost markets.

This business of competing markets, or of competing manufacturers, is of more moment than may appear at first glance. As a real life example, recall the Chinese car company some five or six years ago, whose new sedan was a virtual clone of a foreign sedan manufactured in China; or the case of Fellowes shredders, whose CEO recently lamented the fact that China insisted on full knowledge of intellectual property rights, only to build their own factory with Fellowes technology and know-how included, and begin underselling Fellowes. How's that "billion new consumers" working out for you, eh?

Those who are critical of these observations will likely either play the race card, or retort about competitive advantage and The Wealth of Nations. I have nothing against that book, except that is is incomplete. How so? Doesn't it explain how everyone benefits if each country produces what it can best produce at the least cost, and everyone trades for what they cannot produce efficiently on their own? In theory, yes; but let us not forget the adage that "in theory, theory and practice are the same, but in practice, they're not!"

That is, there are all kinds of things which exist in the real world, and which everyone is familiar with, which don't fit neatly into the mathematical models of economics. So they get left out, or ignored. As an example, consider things such as a fair court system, the possibility of conducting business without needing to bribe every official and gatekeeper in sight, the common assumption and practice that if you have a good business model, or plan, that you will be allowed to develop your business unmolested by local officials (OK, that last one doesn't strictly apply to California, Chicago, or the EPA, but you get my point). The United States, as a free and independent entity, has been so stable, for so long, that people tend to take it, and its continued existence, for granted. And along with it, the system of laws, court system, common language, stable currency, and freedom to move goods and services unmolested by government thugs or piracy.(*) And the existence of a stable market who has both the money and the willingness to buy whatever goods you supply.(+)

But lately, the presence of the last two factors with respect to the United States has become a little less certain. Between the incipient inflation beginning to nip at the heels of Helicopter Ben Bernanke, and the "Hope and Change" economy of Barack Obama, people suddenly have less certainty about having a job at all, or about keeping job they do have; and the money they take home from the job is to a greater and greater extent being spent on more necessary goods such as food and gasoline (items with low price elasticity) and less and less on consumer and luxury goods, which, in the final analysis, one can do without.

And this brings us back to the original point. There is an advantage to be gained, in the form of lowering costs, by automating much of the work, or of sending swathes of it out to be performed by lower cost workers. But let us remember the two stories, one of the frugal Scotsman who heard that a certain wood stove would enable him to cut his heating bills in half, and who eagerly bought two, expecting that he could then heat his house without any fuel at all; and the village who was due to be visited by the king, and who agreed that each villager would bring 1 cup of wine to pour into a communal pot to be shared with the king on his arrival. However, unbeknownst to one another, each of the villages secretly decided to substitute a cup of water for his own contribution, because "it will make no difference, everyone else is pouring wine anyway." Naturally, when the king arrived, he was very chagrined to find that his celebratory potation consisted of the finest water in the land. Yes, one may cut costs, but one cannot do it infinitely. And yes, one may cut down the wages of one's workers, but if one does it too much, suddenly the demand side of the curve is affected, and not just the cost side of the ledger. That is the worth of a man: as a source of demand as well as of supply; and all of the shenanigans and manipulations within the market of late, have not supplanted the existing laws of economics, but merely shifted the intersection point of the supply-demand curve. We have moved from a stable equilibrium point to another point, one which may not in fact be stable.

(*) Or, for that matter, clean air and water: one of the erstwhile "attractions" of some offshore sites (such as manufacturing in China, or reclamation of materials in India) is the very lack of environmental regulations, which lowers costs. But what happens if or when the governments of those countries decide that the monetary advantage of unsafe processing is no longer worth the political cost?

(+)But even within living memory this has not always been a safe assumption. From the Great Depression, to World War II, where we fought a two-front war, to the aftermath, with Communist infiltration of the government, and the possibility of a full-fledged nuclear exchange with the USSR, there have always been bumps in the road. Between the criminal activities of Congress and the President, to try to render our currency worthless through cancerous spending, and the use of our mortal enemies to fund our debt; from the deindustrialization of the United States, to our handing over the very means of production to those same enemies (the arsenal of Maoism); and coupled with relaxing of our nuclear arsenal and sharing our highest technological secrets of them -- is there any question that many of those in the highest seats of power in both business and government are overtly guilty of Treason?

*PING* to fresh birdcage liner on the economy.

*PING* me back to be added to or dropped from the list.

Cheers!

They are guilty of treason.

One of the frustrations of being an American compared to being a citizen of another county is that we have a political and economic elite that is openly hostile to the interests of the American people.

“Between the criminal activities of Congress and the President, to try to render our currency worthless through cancerous spending, and the use of our mortal enemies to fund our debt; from the deindustrialization of the United States, to our handing over the very means of production to those same enemies (the arsenal of Maoism); and coupled with relaxing of our nuclear arsenal and sharing our highest technological secrets of them — is there any question that many of those in the highest seats of power in both business and government are overtly guilty of Treason?”

>>is there any question that many of those in the highest seats of power in both business and government are overtly guilty of Treason?<<

None whatsoever!

From General Curtis LeMay, I have neither the time nor the inclination to differentiate between the incompetent and the merely unfortunate. I cannot afford to have either under my command.

We should have neither the time nor the inclination to differentiate between those acts which are designed to destroy this Nation and those which are simply based upon incompetence. We cannot affort to have either serving in Washington.

When I read liberal essays there's often one lame idea stretched out over 5 or 6 pages. An idea that could easily be summed up in two paragraphs is puffed up beyond reason...

Your essay is the opposite - lots of interesting ideas packed into a small space. Thanks for sharing.

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