Home newspaper delivery and the fragility of efficient systems

In his book Antifragile Nassim Nicholas Taleb notes that the more efficient a system is, the more it is vulnerable to widespread disruption than is an inefficient one. (The efficient system is fragile and the inefficient one is antifragile or at least less fragile.)

We are living through an example here in the Boston area. Once upon a time, each newspaper had its own paper boys. Newspaper trucks dropped off bundles at designated locations where they were picked up by boys on bicycles or on foot (or their mothers if they had the flu) who would then deliver twenty or thirty papers each. (We didn't have newspaper delivery in the town I where I grew up (too rural) but in college I remember getting up at 4:30 each morning to deliver the Daily Dartmouth, which was an enjoyable way to get an early start on the day.)

Then, to make it more efficient, the newspapers dispensed with paper boys and used contract employees to deliver large numbers of papers.

To make it even more efficient, this was outsourced to third parties.

Seeking to achieve an even higher degree of efficiency, all the newspapers started using the same outsource provider.

The Boston Globe operates this way and its outsourced delivery operations deliver the Globe, the Wall Street Journal, the New York Times, the Financial Times, the Boston Herald, the Lynn Daily Item, MetroWest News, and some other papers.

To make the system even more efficient, the Globe switched from this outsource provider to another that promised "better delivery performance" and "substantial cost savings." To achieve the cost savings, the new outsourcee hired fewer people, and the system collapsed on December 28th when the new delivery system was put in place.

As a result of the Globe's single decision, the delivery of all newspapers in the Boston area descended into chaos on the 28th of December. We have not received the FT since then and the Globe is being delivered on an ad hoc basis, including by a Globe columnist who happens to live in town. (He wrote a humorous column (link) describing his delivery route.)

The problem with efficiency is that it ultimately destroys reliability and undermines quality.

New Year's thought: Maybe the Danes are on to something?

Danes were recently rated the happiest people on earth. More recently, the FT (which I am reading online since it hasn't been delivered in the past week) reported the following survey:

Duval Patrick: This is another fine mess you've got us into.

Massachusetts ranked among the best-funded state pension plan when Duval Patrick was elected governor. When he recently left office, it ranked among the worst. Employees continued to contribute 11% of their gross income to the fund, but the state has not put in its share since Gov.Patrick's first budget. (As far as I can remember. This is my impression and I tried to verify it by reading the pension fund's annual report, but they don't break out the state's contribution.) Four states are given a grade of "F" by the Urban Institute for funding their plans: Massachusetts, New Jersey, Pennsylvania, and North Dakota.

Patrick was a big spender, and non-payment of pension contributions is a form of deficit spending that does not require legislative approval.

Looking forward to 2016: An optimistic prediction

The Boston Globe had an interesting factoid on December 31. The rise in heroin use, addiction, and death has been of growing concern here in Massachusetts. In 2014, we had 1256 deaths from heroin overdoses. (By comparison, we usually have about 300 automobile-related and 250 gun-related fatalities each year, including suicides and accidents.) 80% of the opiate dead were men, with an average age of 36. The death toll was an increase of 88% over 2013. The numbers are not in for 2015, but in Norfolk County around but not in Boston the increase was 60% over 2014, and this is probably representative. Meanwhile, auto and gun deaths are trending down.

As it commonplace to make optimistic predictions about the new year, I shall do so: I predict that the number of deaths from heroin in Massachusetts will increase less in 2016 over the previous year than was the case in 2014.

Still, it is very troubling, and I shall make an additional prediction: By January 2018, public opinion will be far more concerned about the risk of death from drugs or the actions of drugged persons than from autos or guns.


Happy New Year.







Lincoln

Global wage growth robust at 2.5% real in 2015 but varies considerably by region

India 4.7%, China 6.2% and Asia overall 3.5%. World 2.5%. Germany 2.5%. Africa 8%.
Low inflation is creating an illusion of stagnant salaries in some countries. In reality, wage growth is the best since 2008, but skewed toward Africa and Asia.
Lincoln

Strong dollar claims another victim

At a Xmas party this weekend, a small "middelstand" businessman here in Hingham, an OEM that provides metal plating to the US electronics and other industrial industries, who has been in this business for decades, said, "I always thought my business would be my retirement fund, because I could sell it. I can't sell it now; my customers are rapidly disappearing. Production is going offshore."

His business is fading like a cheap Chinese knock-off Star Wars Xlarge t-shirt worn by an out-of-shape American tourist at the Great Wall on a sunny day, there enjoying the momentary benefits of the strong dollar that may have eliminated his job by the time he returns stateside.

We need to manufacture more debt to offset these losses in the real economy. The Fed will buy this debt and hand us strong dollars in exchange. That way all will be well.

Prof. Summers says ZIRP should continue for the next decade.

In the FT this morning, Summers says:

". . . for reasons rooted in technological and demographic change and reinforced by greater regulation of the financial sector, the global economy has difficulty generating demand for all that can be produced. This is the 'secular stagnation' diagnosis, or the very similar idea that Ben Bernanke, former Fed chairman, has urged of a 'savings glut'. Satisfactory growth, if it can be achieved, requires very low interest rates that historically we have only seen during economic crises. This is why long term bond markets are telling us that real interest rates are expected to be close to zero in the industrialised world over the next decade."

So I guess that may be it. It is interesting, and to me questionable, however, that financial repression and ZIRP are compatible with financial stability in the long run, as Prof. Summers may assume.