LyrArc Insights

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Search for Practical Hints and Clues

Search for hints and clues in building new supply chains

Better a search for practical hints and clues for a real way forward than a conventional narrative that looks smooth and follows a conventional line of thought but gets one nowhere. There is also a question of language, is the language of mathematical models or lines of software code adequate to the task of discerning and penetrating insight to the true nature of the situation. Does understanding a new and unfamiliar situation require the language of words and visual symbols that capture better the different and varying nuances of the situation. Glimpses and observations that provide hints and clues may even be of a random nature and come in no organized flow. This means it requires taking a unconventional path to find meaning in a new unfamiliar situation. One example of this is that there are often certain myths that cloud a true grasp of a situation. Without questioning these myths or making them explicit and removing what clouds our understanding one could never come to a real grasp of a situation.

There is a sense that lower level of manufacturing can be left to others sent overseas, and the upper end can be handled at home as a more value added activity which pays highly educated workers. This assumes manufacturing is a homogenous activity. When in fact each activity within manufacturing is an activity in itself. Creative development in the form of software code and the activity of creating a new technology is an activity in itself. Each activity has to be maximized for each level of the society and mix of skills in society. Higher income levels of an activity preserved for the home country are not a true guide to tackling this situation and can be misleading, leading false conclusions and over time to adverse results.

Text book theories can add a layer of  confusion. They work only in books because they are simplistic. One society specializes in wine and other in shoes, under economic theories of comparitive advantage. It is a static way presented in a textbook. In real life everything is constantly changing. Subsidies can get one started in shoes, and move up to more sophisticated products, yet the manufacture of shoes need not stop it can be seen as a separate activity to be maximized. New technologies can be acquired both in the process of manufacturing and the knowledge used in the creation and technological development of new products. The main criteria in maximization here is the value it delivers to society's different levels and sections, in jobs, incomes, and in taxes paid to be plowed back into acquiring and adapting new technologies and for subsidies to guide and facilitate this process. This offers clues to what is in reality happening. Compare this to maximization of profits which can deliver for today but not tomorrow literally, and maximization of profits can mean maximization of profits for the individual, group of individuals, or small groups of individuals, but not for sections of society based on skills levels and education levels. They are entirely two different and distinct levels of maximization delivering different results and over time can deliver very different results that are in sharp contrast to each other. When we say small groups of individuals we can still mean tens of thousands of stockholders, which is distinct and very different from the reference to millions of persons in each section of society that has a certain level of education and certain level of skills.

Add to this a factor for the level of acceleration of acquiring new technologies and the old textbook theories fall apart. There may be a collusion period which requires nuanced understanding of words and visual symbols, observation,  and cannot be captured in mathematical models. Both the collusion period in which the accelerated acquisition of technologies is made possible, and the acceleration in and of itself, can be engineered into the process as a top layer to the subsidies that facilitate the process in the early and middle stages. This is what is happening in China and U.S. manufacturing relationships, China and India manufacturing relationships, and also in China and European manufacturing relationships. At the level of the individual one maximizes only in the short run, for the individual in the long run one is no longer there to maximize. Management is around for ten years, before it is replaced by a new set of individual based teams that are individual goal maximizers- essentially maximizing the profits of groups of individuals, small groups and larger groups for that period alone till other groups replace them. 

Yet two processes are not accounted for in this kind of maximization at the individual level. Society continues to function it does not have anything written in its DNA that it is there only for the ten years and not after that. The other process is change which is constantly taking place. Over time each ten year period there is also a third factor call it cumulative change that can best be described in the language of quantum leap. Cumulative process creates a new process of change called correctly a quantum leap. How does this happen? At first very little is visible all one has to do is to get the process started for the society that is behind. The gap is too wide between a society that is way ahead and one that is way behind. It is even laughable to compare so no one thinks about it, even though it is foolish not to think about it. That is the situation a Mr. Clinton and groups of managers of enterprises or even a Mr. Bush and groups of managers of enterprises faces in 1990 and 2000. By 2000 two ten year periods have passed. And imagine for a moment all the factors we have mentioned have taken place and are taking place. The subsidies to facilitate development in China have taken place that are seen as ok or acceptable when the gap is so wide that no one cares in the U.S. in 1990, and no one cares much about in 2000 in the U.S., and the same in Southern European countries such as France, Spain. 

The next process that happened can be understood by drawing from social aspects that are also not in textbooks, and for sure not in economic textbooks. This process is the introduction of the invisible nature of change that happens in the third period of ten years. Remember now that the process of change is cumulative. Add to this the factor that political change is also based on individual maximizers of now in the place of profit the political power in and of itself, and the dividends of political power that can include indirect profit. A group of highly motivated individuals and groups of individuals in the U.S. for instance around a Clinton or a Bush or a Obama.  By the third period of ten years there is another smaller process at work within the larger process, and this is the fragmentation into different groups in the countries that were way ahead. By ceding entirely to China their manufacturing of lower value added by 1990 the U.S., countries in Europe, and India, have delivered the cumulative process of development to China. And by accidental or knowing collusion transferred many of the technologies that accelerated the process, with cumulative acquisition of technologies by countries that were way behind. What this does in the third period of ten years by 2010 is to entrench all these smaller processes that work within a larger process. A key to understanding this is acceleration of the technology transfer and technology acquisition both from these processes working in a cumulative way and from a qualitative factor of a determined and motivated country. 

We have so far covered the area that the process is cumulative and that it can be at an accelerated level. And we have said that it can then be going through a period of collusion inadvertent or in the process of self maximization of individuals and groups in the countries that were once way ahead. What happens next is drawn more from social aspects, it is that the process becomes kind of invisible, either inherently or is camouflaged without giving much thought about it, in the countries that were at one time way ahead. How does this aspect of the process work? It works through splitting up the society in the countries that were way ahead in ways that are never understood clearly, only gradually slipping back into the consciousness through adverse outcomes such as technological leadership loss at a later stage such as in one glaring example 5G in telecommunications technologies. This splitting up of societies happens- without anyone in the countries that were way ahead realizing what is happening-  because the interests of some groups of individual maximizers starts to diverge in a drastic way. This results in collusion inadvertent, accepted, or camouflaged without realizing its consequences, of groups of maximizers of profit in the countries that are way ahead with groups of individuals who are maximizers of profit in the countries that were once way behind. Add to this of social goals of party as with the Communist Party in China for accelerated development by acquisition of newer technologies in cumulative fashion. By the third period of ten years 2010 this becomes unsustainable with job losses in the smaller rural communities and smaller towns dependent on manufacturing communities for jobs, and the taxes that pay for public services in the U.S. and Southern Europe. The  lack of tax revenues forces municipal government in these communities to keep cutting services, disinvesting in the communities schools and health services, libraries, and other basic services till it destroys these communities over time. This is now visible in the society of the countries that are way ahead as a kind of social wounds that are patched up by the third period of ten years - China and the U.S. and southern Europe in 2010 to 2020. It may not be an exaggeration by 2020 that there would be tech communities of software, technical skilled, technologies personnel, and financial services, legal, accounting and other service personnel in larger cities with interests divergent from the rural communities that have their structures gradually crumbling, in the countries that are way ahead. These communities in large urban cities in the U.S. and Southern Europe now see their interests allied through global supply chains and other global connections with the urban cities Beijing, Shanghai, Hong Kong, Shenzen.

At the larger level of macroeconomics the trade outflows matter with a $1 billion a day going from the U.S. to China. A matter that gets to this point through the large process and the smaller processes working inside it that are described. At some point political processes get redefined, realignments happen in political changes as happened with the entry of Mr. Trump into politics. In a sense a random event as random events begin to take place with rapid urgency in the new climate after three ten year periods 1990-2000, 2000-2010, 2010-2020. It is at this juncture that we find ourselves. And understanding the situation we are in is essential to finding solutions.

There is also the sense of belief, what we believe in- something like This I Do Believe. First we have emphasized that new ways of thinking are needed, as the old ways of thinking and structures do not work or are getting us to the wrong places. This is not in our interest as society or nations.