231–240 of 314 posts
Insurance is the opposite of a lottery. If you think buying lottery tickets are a waste of money because you lose out in the long run, the same argument should lead you to think having insurance is a good thing.
If insurance was cost effective in the long run, insurance companies wouldn't be profitable
I've found "efficiency as the opposite of stability" a very powerful concept to think about - even though it's fairly simple, it seems to be almost a fundamental law. Whether it's about the economy at large, your own household, a supply chain, what have you - as soon as you optimize for efficiency by removing friction, you take all the slack/damping out of the system and become instantly more liable to catastrophic f…
People often focus on one thing and overlook the sacrifice they're really making. Everything has a tradeoff.
I've found "efficiency as the opposite of stability" a very powerful concept to think about - even though it's fairly simple, it seems to be almost a fundamental law. Whether it's about the economy at large, your own household, a supply chain, what have you - as soon as you optimize for efficiency by removing friction, you take all the slack/damping out of the system and become instantly more liable to catastrophic f…
Relieved to learn that other people dwell on this as well. My anxiety stems from the idea that modern corporations are incentivized to ruthlessly optimize for efficiency--short-term gains--thereby outcompeting corporations that are structured for longer-term outlooks by engineering redundancy (which you call stability) into their processes. I don't know how to begin to incentivize the idea that efficiency is not the…
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Right. But, having a single source is more efficient than multiple sources---you can integrate tighter with their ordering system, packaging, product quirks. Until it stops working. Having all of your sources in one country is more efficient. Until it doesn't work. Managing all of your materials just-in-time is more efficient. Until a backhoe hits the gas main in the street outside and you can no longer get trucks in…
I guess my point is that, in everything I've read and experienced, JIT isn't about efficiency to an extreme (drop to 1 supplier, have 1 uberefficient factory, have 1 expert). You still maintain a buffer, and if possible multiple suppliers. The source of JIT (in manufacturing) is primarily Lean or the Toyota Production System. Those do not endorse zero-buffers or sole-sourcing for the purposes of efficiency. The purpo…
You do not have to live for ever, so surviving a extinction level ecvent is more than the "right" level.
Being so brittle that the failure of one delivery kills you is less than the "right" level.
How long do you want to live? And when you die, how is it going to happen?
It is pleasing to see firms go out of business in a orderly fashion, such that they have the resources to shut up the shop properly, and every one in the business gets "onto the life-rafts". But it is more common to see businesses go down in a screaming heap with huge debts and big messes for others to clean up.
When I was at business school I was taught that a firm should have the correct amount of debt such that it maximised the tax shield of interest payments and had no fat that a hostile acquirer could use to do a hostile takeover.
That was in 2007. I am quite sure the course teaches something different now!
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Only if you define local interest as purely financially motivated. I am not even talking about the ethics, but even social status is not only dependent on wealth. We are much more than a bank account number, thinking that we are is more or less a pathological disease, because rationally it makes no sense.
> Only if you define local interest as purely financially motivated social status is not only dependent on wealth For an awful lot of people, it basically is - I mean, practically the entire field of finance and professional management would look at the example I gave and say, "that's exactly the right thing to do." Mitt Romney's entire professional career follows that principle, and it's largely seen as a net positi…
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> Fragile systems are often very successful for a long time because they ignore hidden risks and then collapse due to the unexpected. There's another interesting aspect to this in that things that are failures from some perspectives may not be from others. If stripping resiliency out of a company nets enough savings in the short term, it may still be profitable to the owners it even if it's long-term fatal. As a hypo…
Although I lean towards seeing killing the company as short-sighted, suppose you then invest that money back into a new venture. You have far more capital than you would have had you let the business remain healthy. This may give you even better value in the long-run (say 200 years) if you let this new venture live. But if you kill this venture too and invest its earnings into yet a third venture...
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That's a nice way to think about, and it reminds me of Nassim Taleb's "antifragile" thesis [1]. Basically, the world is more random than you think, and to operate rationally under uncertainty, you need to be open-minded about opportunities and risks with huge asymmetries. Fragile systems are often very successful for a long time because they ignore hidden risks and then collapse due to the unexpected. [1] https://en.…
> Fragile systems are often very successful for a long time because they ignore hidden risks and then collapse due to the unexpected. There's another interesting aspect to this in that things that are failures from some perspectives may not be from others. If stripping resiliency out of a company nets enough savings in the short term, it may still be profitable to the owners it even if it's long-term fatal. As a hypo…
>Seen in this light, at least some inefficiency is like an insurance policy. Think about your own situation. Every year that you don’t get into a car accident and your house doesn’t burn down and you stay healthy, you could think to yourself that you have ‘wasted’ your money on various pointless insurance products, and that you’d be financially better off without all those insurance premiums to pay.
This is a faulty claim. Traditional economic efficiency would say we _should_ stockpile medical supplies if it were more efficient for the markets in the long-term, which it would have been. The issue here is that _governments_ and experts didn't work together effectively (despite experts regularly noting the possibility of a pandemic, for example, Gates et al.) and the fact that our government generally isn't Keynesian. A quote (source: IMF https://www.imf.org/external/pubs/ft/fandd/2014/09/basics.ht...):
>Keynes argued that governments should solve problems in the short run rather than wait for market forces to fix things over the long run, because, as he wrote, “In the long run, we are all dead.”
As it relates to Global Warming, for example, we have various options. We could solve it by being "less efficient" (extracting less from the earth — and in fact, a Keynesian approach to that would be taxation to slow growth in harmful industries) but zoomed out, if we deal with global warming, we are more efficient over the long run. Moreover, we want to be _efficient_ in our development of green technologies.
The trouble isn't so much efficiency, it's zeroing in on making particular processes efficient to the detriment of the whole across time and in the present moment.
I feel like a lot of conversations and articles recently speak to an inadequate understanding of risk, and planning for risk. Risk is made up of at least 2 or 3 components: what is the probability something will happen? And, if it does happen, what is the impact and how will you mitigate that impact? For example, you may believe that a change to a website you are deploying has a low probability of taking the website…
I've found "efficiency as the opposite of stability" a very powerful concept to think about - even though it's fairly simple, it seems to be almost a fundamental law. Whether it's about the economy at large, your own household, a supply chain, what have you - as soon as you optimize for efficiency by removing friction, you take all the slack/damping out of the system and become instantly more liable to catastrophic f…
The rule holds true for switchmode power supplies. Sometimes you have to add a resistance (inefficiency!) in series with the output capacitor to achieve stability.