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A Pragmatist's Take

By Douglas Moran

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About this blog: Real power doesn't reside with those who make the final decision, but with those who decide what qualifies as the viable choices. I stumbled across this insight as a teenager (in the 1960s). As a grad student, I belonged to an org...  (More)

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Restarting an economy: points to ponder from history

Uploaded: May 14, 2020
When and how fast to reopen the economy is a controversial issue. Reopening will become increasingly difficult with time because there are more opportunities for failures of critical links in a business' complex network of dependencies for both its suppliers and customers. And assumed redundancies may not exist once you look at the details, for example, manufacturers of toilet paper for businesses couldn't easily switch to the home market: different quality, dimensions of rolls, ...(foot#1) Some of the critical dependencies are not business entities but rather critical masses of workers with specific skills.

I have no advice to give on our current situation, but rather will offer some examples to help you understand and question what is being discussed.

----The Fall of the Soviet Union and Highly Enriched Uranium "Waste"----

Shortly after the fall of the Soviet Union, a newly independent republic discovered it was in possession of a large quantity of Highly Enriched Uranium (possibly up to weapons grade). Why was this "discovered" rather than "known"? It was at a processing plant that had improved its efficiency over the years, so it was producing more HEU than its quota. But the managers didn't want to commit to those higher production levels to avoid punishment if there was a decline. Because the managers didn't have control over who their suppliers were, they couldn't reduce the amount being sent them. Similarly, they didn't control the shipping to the next plant -- they wouldn't know whether the shippers or the recipient could handle any extra, and not report them. What to do, oh what to do? Brilliant idea: Label it as "waste", and store it among the legitimate nuclear waste generated during the processing. Simply Kicking the can down the road -- postponing the reckoning.

That reckoning came with the break-up of the Soviet Union. There was no longer an internal need for HEU, and properly guarding it was more than that republic could afford. However, unlike many businesses in the former Soviet Union that failed because they didn't know their suppliers and/or customers, the republic easily found a motivated and deep-pocketed customer for its HEU: the US government. It was buying nuclear stockpiles and weapons to keep them from falling into the hands of rogue states or terrorists.

----How many nuclear bombs would be needed ...----

The 1991 Strategic Arms Reduction Treaty (START I) between the US and USSR reduced strategic nuclear weapons by 80%. An important part of the discussion was the question of how many nuclear bombs were needed by each country to ensure deterrence, and, in case that failed, that the other would be utterly crippled. That was simplified to asking how many bombs were needed to hit the crucial targets. The surprising answer was only 10 to 20.

The crucial targets were the oil refineries and associated facilities, including ports and pipeline hubs. There wouldn't be enough stored and alternate energy to mine, refine, fabricate parts, and rebuild the facilities. And while this was being done, you still needed to support the existing population. The assessment was that long before any significant oil refining resumed, the populations of the cities would need to disperse into rural areas to be close to food and work to produce it.

If you could manage to get the parts needed to rebuild, you would need to find and re-assemble the teams of designers, construction workers, ... from among those who had survived and the many places they had scattered to. Supporting the workers at the reconstruction sites also involved supporting those who supported them, ... With the population dispersed, the surviving facilities, equipment, and materials in the (abandoned) cities would deteriorate, imposing additional costs to returning. There was a lot of additional detail -- which I don't remember -- but you get the idea.

----Business Ecosystems----

In February 2011, President Obama asked Apple's Steve Jobs what it would take to have the iPhone manufacturing jobs brought back to the US and Jobs replied "Those jobs aren't coming back." Much discussed was a resulting article "Apple, America and a Squeezed Middle Class" by Charles Duhigg and Keith Bradsher in The New York Times, ^2012-12-21^ (updates: ^2017-04-05^, ^2019-11-01^, ^archive.today^). Apple's marketing strategy to be a luxury brand resulted in an ecosystem that was somewhat larger and more tightly integrated.

However, the article does give a sense of why such ecosystems are important and how large they can be. For example, the automobile industry was centered in Detroit but extended to distant cities because part suppliers there could use the railroads to provide overnight, 2-day ... delivery of many tons of parts to the assembly plants.

----Workforce expertise----

Many companies underestimate the skills of their workforce and the effort and time involved acquiring them because so much of it is comes through on-the-job training by fellow employees, experience, and repetitions.

In World War I, many critical workers enlisted and only months later did the British government realize the impact on war production, and recall some of those workers from the front, if they were still alive. For example, Britain had very good quality coal that facilitated its industrialization and powered most of its fleet. But with so many miners in the army, coal production suffered so much that an energy crisis developed. A more obscure example: It was not recognized that the skills needed by a machinist to produce a timing fuse for an artillery shell took about 3 years experience. Many of the replacements in the factories had no prior experience and there were too few experienced machinists left to train and mentor them. In the 1916 ^Battle of the Somme^, it is estimated that 30% of the British shells were duds (did not explode).

My father worked for a glass-manufacturing company, and handling tasks such as scheduling batches and furnaces. Shortly before he retired, the company realized that many of their furnace workers were about to retire -- they were the WW2 generation -- and that much of knowledge about the tweaks for the idiosyncrasies of the raw materials and the furnaces existed only in the heads of those workers. My father got reassigned to observe and question the workers about what they were doing, and document it. This is more difficult than you might expect -- the early time-and-motion studies found that what skilled workers described themselves as doing was often very different from what was observed.

When a business is interrupted, employees may move away or commit to another employer. The business may fail to restart because there isn't enough time/money to skill-up new employees and re-establish a company culture and teamwork.

----Invisible dependency changes / Invisible weak links in a chain----

In the 200x's, I was involved in the Emergency Preparedness activity of Palo Alto Neighborhoods (PAN). One of the cautionary examples was of unstated assumptions being built into the plan, and thus not likely to be tested in the typical exercise. Back when the plan was created, there was a lag time between ordering medications and supplies and them being delivered, so hospitals maintained a cache sufficient to handle high demand and shipping delays. The County Health Department also maintained a cache of important supplies in case any hospital ran short. Well, budget cuts came, and County Health decided that they could drop their cache because the hospitals could back up each other. And because deliveries had become fast and reliable, the hospitals reduced the size of their cache. And neither thought to inform the other that they were doing this. Fortunately, the lack of a proper cache was revealed by a situation where it was only inconvenient, and not disastrous.

Many computer software developers and administrators have their own stories in this area, me included.(foot#2)

----An earlier failure of centralized systems failing under stress----

Much earlier: 1200-1150 BC. The ^Late Bronze Age Collapse^ of the Eastern Mediterranean. One day there is prosperity -- at least for the elites -- benefiting from extensive trading, and general stability provided by large, centralized, bureaucratic governments. The next day, the palace is sacked, the government disappears, and the population heads for the hills, creating small villages in defensible, obscure locations. In only a few centuries, recovery starts to become visible. Or at least, that's the story.

----Footnotes----
1. "^What Everyone’s Getting Wrong About the Toilet Paper Shortage^" - Will Oremus, Marker.medium, 2020-04-02. "It isn't really about hoarding. And there isn’t an easy fix."

2. Invisible dependencies in software: Personal example:
In the late-1980s and early 1990s, I managed a computer network for a department of a company that was plagued by power interruptions. I tested that the internal network could continue operating if it was cut off from the Internet, and that if the main server didn't come back up, the backup server would support the clients (desktop workstations). That is, until an "improvement" was made to the OS that was thought to be so inconsequential that it wasn't mentioned in the Release Notes. When the backup server came back up, it first checked with the main server to confirm that its data was up-to-date. And if the main server didn't answer? I would wait until it did. And wait, and wait. And the main server did something similar, freezing up until it could get confirmation from the external networks.


----
An ^abbreviated index by topic and chronologically^ is available.


----Boilerplate on Commenting----
The ^Guidelines^ for comments on this blog are different from those on Town Square Forums. I am attempting to foster more civility and substantive comments by deleting violations of the guidelines.

I am particularly strict about misrepresenting what others have said (me or other commenters). If I judge your comment as likely to provoke a response of "That is not what was said", do not be surprised to have it deleted. My primary goal is to avoid unnecessary and undesirable back-and-forth, but such misrepresentations also indicate that the author is unwilling/unable to participate in a meaningful, respectful conversation on the topic.
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If you behave like a ^Troll^, do not waste your time protesting when you get treated like one.
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Comments

 +  Like this comment
Posted by Resident, a resident of Another Palo Alto neighborhood,
on May 14, 2020 at 9:08 am

Opening up the economy is much more than restaurants, hair salons and similar.

You are right when talking about businesses that can change and adapt. There have been focus articles on tv news about printing businesses who have lost their major corporate printing for things like conferences and theater productions, changing their market and making such things as signs for hospitals, grocery stores and even the graduation lawn signs we are seeing in the front yards of our graduating seniors.

Those who can adapt are going to survive through hard work and innovation. It is good to see this. Looking at history, many air force pilots were able to continue their skill and love of flying to become flying taxis, flying delivery services, particularly in more remote areas. Their wartime flying experience and skillset probably had very little going for them back in civilian life so marketing the skills they had was necessary for them to earn a living.

Many professions are going to have a hard time. Professional musicians particularly orchestra type musicians won't be able to perform yet still need to practice regularly to keep their skills top notch. Yet they will still have to find something to do to to earn some money. Likewise theater staff. I saw that some movie theaters are going to be able to show rereleases from Hollywood of such classics as Jaws. The question of whether a modern theater audience will accept or be terrified by the movie as the original audience, but at least it does show that the movie industry is adapting. When they advertise the price of a ticket as $2, novelty value alone might be the draw.

But when it comes to reopening the economy, it has to be done and it has to be done so. Otherwise, there won't be any small businesses left to open.


 +  Like this comment
Posted by waves, a resident of Meadow Park,
on May 14, 2020 at 5:00 pm

> printing businesses who have lost their major corporate printing... and making such things as signs for hospitals, grocery stores and even the graduation lawn signs

That's about a 90+% revenue drop, based on my experience.

But to the blog post - that's an interesting set of examples. You mentioned 1918 and WWI; isn't the 1918 pandemic and recovery an appropriate point to ponder from history?


 +  Like this comment
Posted by Douglas Moran, a Palo Alto Online blogger,
on May 14, 2020 at 5:15 pm

Douglas Moran is a registered user.

> "isn't the 1918 pandemic and recovery an appropriate point to ponder from history?"

I haven't seen a good treatment of the economics of the 1918 epidemic. One complicating factor was that the demobilization of troops after WW1 was a significant factor in the unemployment levels, as was the sudden end of demand for war materials. Another was that the US -- and the other combatants -- were trying to suppress information about the extent of the epidemics in their countries to avoid encouraging the enemy.

Comments are welcome giving additional examples of this topic, or additional detail and perspective on the ones offered.


 +   6 people like this
Posted by scofflaws , a resident of Old Palo Alto,
on May 15, 2020 at 10:09 am

Another news report about a business violating his state's shutdown order. He catches COVID-19 and has spread it to other customers. Scofflaws and the people who encourage them are just making the disease more deadly. Web Link


 +  Like this comment
Posted by Deep State, a resident of Nixon School,
on May 15, 2020 at 12:09 pm

Sorry, @scoflaw, can't trust media. Fake video.


 +  Like this comment
Posted by Douglas Moran, a Palo Alto Online blogger,
on May 15, 2020 at 3:24 pm

Douglas Moran is a registered user.

@Deep State
If you are going to claim that a video is fake, you need to provide verifiable evidence, eg a link to a credible source. Doing my own web search, I found none.
If you meant to claim that Cuomo's statement in that video was false, you needed to have provided verifiable evidence.
Readers: While I couldn't find any evidence for part of Cuomo's statement, but could find information that strongly implied that it was a false "off-the-cuff" statement.

********************************

@scofflaws

This comment is way off-topic and would normally be deleted. Being hysterical ("irrational from fear, emotion, or emotional shock") would also qualify it for deletion (bad inferences).

The topic here is part of a larger discussion: The costs and benefits of various policies on reopening. For example, people are/will be dying from the shutdown -- deaths of despair, medical treatments deemed non-essential (cancer screening, treatments for various serious medical conditions,...).

This blog's topic was the potential complexities of reopening the economy -- a precursor to a cost/benefit calculation.


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