Saturday, May 2, 2020

In praise of inefficiencies

Paying homage to Russell's famous essay titled, "In praise of idleness", thought will write down some thoughts related to what we shun as inefficiency that actually brings value in times of crisis like the current one.

In the decades past and still in many parts of the world, there was/is a lot of wastage in how resources are consumed and value is derived out of work human beings do. This has lead to relentless efficiency improvements and Just In Time solutions to keep RoI (Return on Investment) high. Compared to how things were a century back, this move to make things more efficient is desirable. But in capitalistic societies, this idea is on overdrive widely applied to any and every domain. Thus, the total number of hospital beds available in the USA has come down from 1.5 million in 1975 to 900K now, while the population has increased from 220 million to 330 million! In other words, there were about 8 beds per 1000 people in the 1970's. That number has been reduced to less than 3 per 1000 now! While this makes the system very efficient, keeping the occupancy rates very high making full use of all the available hospital beds, when we have a pandemic, there is hardly any surplus capacity to serve the need. 

This is not limited to hospital beds alone. We keep seeing news clips these days that show farmers ploughing away their own crop destroying millions of tons of potatoes and tomatoes, pouring down milk into the drain, etc. while there are long lines of starving people in front of food banks. This jarring disconnect is a result of highly efficient farming model that produces vegetables/milk matched to the needs of their specific buyers and so has only equipment & packaging material to ship the product to that specific type of clientele. Thus, a potato farmer selling his potatoes to restaurants has only 100 lb bagging machines. Now that the restaurants are closed and people need to eat at home, he should be able to package them in 5 or 10 lb bags to ship to grocery stores and food banks for consumption by small families. But equipment or even the needed packing material is no longer available! 

Of course I fully understand that under normal working conditions, if the farmer maintains multiple packing equipment/material or if the hospitals keep a large number of beds in reserve for that rare pandemic, their capital/operational expenses will go up, putting them at a disadvantage with their competition. The overhead will probably even put them out of business. But before we brush this off as "nothing can be done", let us look at it from another angle.

In the "Due Diligence" book about microlending, the author David Roodman points out that the economically poor view the notion of  insurance very apprehensively. To them, buying insurance policies appears like throwing away good money into a product that most probably will never give you back anything of value. Of course we all understand the value of insurance since we carry, life, automobile, property and other types of insurances. But you get the idea since most of the years go by without us filing any claims. In situations where the poor could have used the safety net provided by insurance, they get totally wiped out. If we can understand the value of insurance, we should be able to understand the value of some fat being left in the system as well. 

While we have been drinking the efficiency cool aid for decades (and reaping its benefits under normal conditions), it is interesting to note that extremely robust systems that exist in nature tend to be extremely inefficient, giving us a clue for complex system designs. Consider this fact: the human DNA when laid out in a straight line can stretch from US to Europe. If you fly over this line in a plane, clusters of genes may be found like small islands seen as pin pricks in the ocean! Collecting all the pin prick land masses, at the most you may be able to  form something like Tokyo's metro train line equivalent. This mental picture helps you easily understand the sparseness with which genes are distributed in the DNA structure. We can point to many such examples in nature. Think of Fermi's paradoxical question of "Where is everybody?" that indicates the way our entire universe is structured sparsely. 

We do have the responsibility of feeding everyone in the planet, continuously improving the quality of life for everyone and so on where improved efficiency in whatever we do helps. But if there is another global crisis where efficiency pushed to the limit results in a lot of causalities, that is not good either. Hopefully we will learn our lessons this time around to internalize the idea that being hyper efficient is not always necessary or good. Relaxing a bit, be it in personal, societal, national or international level, allowing some fat to remain in the system may help us in lean times. A recent study said people of Denmark are happier overall, since the Danish society prefers and encourages the middle class lifestyle and looks down upon hyper competitive, hyper driven silicon valley types that are out to dominate the world. May be there are some lessons in that culture & lifestyle to lower our stress levels and build more sustainable societies. 

Next time around you ate a bit more or didn't get a promotion or bought something that you don't absolutely need, rather than feeling bad, perhaps you should think that you are helping the world add on some fat for lean times.  Not only that it may be good for you, you might even be doing the world a favor by being a bit mediocre & inefficient. :-)

PLMK your thoughts on how you will design a society that encourages moderation and is happy to maintain enough reserves for unexpected emergencies. Giving out incentives? Govt maintaining the reserves?