Tag Archives: COVID-19

A Post Crisis, Economic Recovery and Crisis Mitigation Proposal

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In my last post, I argued that Supply Chains increased the spread of the COVID-19 Pandemic. I proposed the idea of regional centers for manufacturing to minimize sprawling supply chains and to encourage local innovation to meet different needs based on those regions. I think I need to take this to the next step. Localizing ability to respond to crises. Obviously there are huge benefits to scaling manufacturing capability during times of stability and crisis alike. The cost of making a single N95 mask is much lower whenever you know you’re going to crank out another 100,000 masks over the next few weeks. Because the cost of all that capital equipment is spread across all the masks.

However, because of the centralization of these manufacturing centers, in many cases in China or South East Asia, this creates a supply issue if the entire world needs the exact same thing. This requires a strong central buyer to compete on the market to buy additional supplies. In the US that should be the Federal Government. Sadly, this hasn’t happened and in fact, the President is playing favorites with states and providing medical supplies. This is hugely problematic. However, there’s an opportunity here to protect states in the future from an outbreak and to rebuild the economy.

I propose that states, let’s go with Oregon, cause I live there, creates regional innovation and manufacturing centers (OIMC – Oregon Innovation and Manufacturing Center). These OIMC should be positioned at least one per country, but carefully to ensure that if there’s a critical event, such as a Cascade Subduction Event, the region will have an OIMC on each side of the event. In the Portland Metro Area we’d want one in Easter Portland and one in Beaverton or Hillsboro. Furthermore, these should be located in such a way that if a tsunami hits the coast, an OIMC can double as a shelter and emergency production center.

The goal of the OIMC at the surface would be to manufacture critical items during a crisis. For example an OIMC would have the inventory to build ventilators, N95 masks, disease test kits, materials to stop flooding, fight fires, or whatever major crisis emergency items that might impact that specific region. For example, Roseburg might have more items to fight forest fires than the Portland region, because of the types of crises that impact that region. The list of items should be defined by a combination of FEMA and that state’s emergency and health agency.

However, we can’t just have an OIMC doing this sort of work. There aren’t enough crises (thankfully), to warrant establishing a dozen or more of these locations. That’s why these aren’t just Crisis Manufacturing Centers, these are innovation centers. They become a low cost rental space for businesses to start. For example, you want to open a welding shop but can’t afford the cost of equipment, hiring people, managing books, and the cost of a place to rent? No problem, the OIMC will offer business loans and services to manage HR, your books, sales, and provide a no cost then low cost rental location. You have trouble hiring people with the right skills? No problem the OIMC will offer year round training sessions on a variety of tools. It will have to because it will need to have all the skills to make those critical items.

Wait a minute, won’t the OIMC be competing with other companies? Yes. However, whenever we are not in crisis the OIMC can become flex capacity that companies can rent out until they have the capital they need to expand their business. So, during normal time the State of Oregon is not competing with medical suppliers. They are place that offers services instead. This will allow the OIMC to essentially pay for itself.

Furthermore, these centers offer an opportunity for the region to develop and build technologies they need to support themselves. Given the cost of some farming equipment, the OIMC could elect to manufacture some lower cost farming equipment in really hard hit regions. There are some blueprints at Open Source Ecology which can provide an idea of what we could build, if we need these OIMC to provide a lot of capability during a short time.

Holistically, I think this approach can provide flexible manufacturing capability during a major crisis that will allow states and counties to meet their need when the entire country is stressed at once. It will provide regional support during times of emergencies, which seem to occur more and more frequently, and it can provide an opportunity to rebuild communities by offering skills and spaces to start new businesses. Everyone is going to be hit hard by this pandemic. We need a serious plan for addressing this.

Supply Chains Increase the Likelihood of Pandemics

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I think in general the way we respond to this COVID-19 (Coronavirus) pandemic will position us to manage the next pandemic. I know that isn’t something anyone wants to be thinking about as we’re barely into this pandemic. Deaths are rising. We have political leaders making choices around managing the stock market which isn’t the economy. If you want proof of that look at the stock markets response to 3.3 million unemployed in a single week in the US. The Dow Jones Industrial Average increase by 17%.

By having ample supply for treating patients and building strong robust processes we can manage the current pandemic. We can minimize the impact to the overall economy and come back stronger than before. Especially if we make some structural changes that make the direct impact of getting sick survivable. This article isn’t about what those should be.

Instead I’m looking at the forces that increased the likelihood of spreading this disease. Shareholder Value, or more precisely the impact that focusing on shareholder value had on business decisions. Since the Friedman Doctrine was introduced in 1970, we have a steady movement for outsourcing and offshoring. Both of these helped reduce the direct labor costs and environmental regulatory burden on manufacturing companies. It’s helped economies like South Korea, China, Taiwan, portions of Eastern Europe, and most of South East Asia move dramatically from a more agrarian and textile economy – similar to what we see in Africa today – to a modern economy. We can see this through trade, Cesar Hidalgo has dome some amazing research on this and I highly recommend reading his book Why Information Grows, because he outlines some of the reasons why economies mature over time from agrarian to producing semiconductors.

To summarize it, it all starts with trade patterns. You are able to see the knowledge gain in specific sectors in how the trade patterns evolve over time. For example dye making eventually leads into manufacturing pharmaceuticals and other chemical businesses. Eventually this leads to the capability to manufacture semiconductors as all of these use the same sort of fundamental sciences. Hidalgo argues this capability has to mature over time and local expertise must mature. Through the types of items a given country exports we can see how that knowledge is growing and changing over time. Eventually, these countries will create their own businesses to compete with mature companies.

This last part isn’t much of a surprise for anyone that’s read any of the Innovator’s Dilemma books. This is a common practices of dropping “value” functions to lower cost countries and companies from those countries. AsusTEK is an example of this. They started as a supplier to Dell and eventually pushed Dell (for a time) out of a number of markets. In some markets Dell hasn’t been able to reestablish itself and likely never will.

So what does all this have to do with a pandemic? Well as we increase the amount of trade with countries outside of our own region we increase the amount of connections between our country and that country. Those connections must be maintained by people. Since China is a significant trade partner and has manufacturing capability spread out all over the country, it was inevitable that a virus in one part of the country spread quickly through out. In fact the highspeed rail made it incredibly likely. Furthermore, with all the manufacturing in Wuhan, that increase the likelihood of people outside of China coming in contact with the disease.

Since our business leaders have decided to invest so heavily in China, we have something of a weakspot in our supply chain for any future pandemic that starts there. However, for other countries the US or portions of Europe would equally be as likely as source of pandemic source. There’s just a lot of business being done in these countries.

The larger problem will be that because there are zones of high concentration for specific industries in specific countries, that people will be traveling very frequently to those areas. How do we address this, since this is basically what trade is all about.

Well, I think that there’s a solution in the idea of regional production capability. For example, Zara has a lot of regional locations for manufacturing. This can help with supply across both that region and other regions for when there’s a crisis. This minimize the economic impact on Zara as the the crisis moves across the world. Furthermore, this is a good business strategy because regionally disparate countries have different fashion tastes and desires for a given time of the year.

In other cases, the idea of Reverse Innovation can play a key role in this. Reverse innovation is where creating a product that’s profitable in, say, rural India, could be brought back to a place like the United States and sold for an even larger profit. This allows for continually lowering costs, as the product itself would naturally be cheaper, and probably lower total cost of ownership, as the Indians using the equipment may have different skills or tools available and may not be able repair the high tech stuff we can in the US.

An example of where this approach would be highly beneficial to the entire world is with Ventilators. In the US a new one can cost upwards of $25,000, which is obviously out the of the price range of most hospitals in Rural India. If you make on cost effectively in India (which MIT just released plans for a $100 ventilator) you could make it very affordable and would easily allow governments to create stockpiles. It would also allow businesses to quickly tool up and make them, since it looks like they use off the shelf parts.

If business leaders and governments focus on regionalizing supply chains and encouraging reverse innovation, we can work to slow the effects of the next Pandemic. We’d be more positioned to flex supply to meet the increase of demand during the crisis. We’d reduce the amount of travel to potential hotspots, as fewer people would need to travel internationally to meet with suppliers. No more long haul trips to Asia for most people.

In the end, we’d end up creating more share holder value doing this, because we’re meeting customer demand while continually improving products and responsiveness to changes. We will have another pandemic. We will have other market crashes. Planning for them during this one will reduce the impact of the next one.

Managing Self-Isolation

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Since October, I have been in a form of self-isolation because of my allergies. Now, many of you don’t know me, but my allergies became very serious in October and I went to the ER for anaphylactic shock related to eating Ginger. Subsequently, I became so allergic to my dogs, that my throat would feel like it was closing up if I was around them for more than a few minutes. I became unable to walk them, as I’d accidentally put their dander on my tongue whenever I’d be trying to open a plastic poop bag. Which lead to an immediate allergic reaction and needing to use an inhaler.

Furthermore, because of all my food allergies, I couldn’t eat out. I’d have a reaction to almost every food except for breakfast food. I’m allergic to Citric Acid, which is in just about every food known to man. I also had to avoid touching my wife because she often kisses the dogs and eats foods I’m allergic too. This creates an additional barrier that you may have to deal with if you actually get sick. I was, however, able to go to work and the grocery store (in fact the latter had cleaner air than either work or home) so I wasn’t entirely self isolated, but basically was isolated.

Here are some of the things I experienced that you should expect the longer you’re in self-isolation:

  1. Loneliness
  2. Depression
  3. Stir craziness
  4. Frustration
  5. Anxiety

Here are some tips on how to manage these:

  1. To combat loneliness I would play video games with friends. I’d talk with them using Discord. I strongly recommend getting on the phone with people on a regular basis. It will help. You can’t get them sick over the phone and they can’t make you sick. Plus, you’ll be helping other people deal with their loneliness in a way that they may not realize they need.
  2. Meditate – I use an App called Headspace, there’s a 30 day trial. I recommend using this to help deal with some of the anxiety, frustration, and depression that comes from being self-isolated. I’ve talked about how I’ve been using it for close to 2 years in other blog posts to fight depression. Ironically, it can also help you feel less lonely (there’s a program on dealing with loneliness in it), because you aren’t mediating alone. You can literally meditate with others remotely in the app.
  3. Make a comfortable space. You’re going to be stuck in your home for a while. make sure that you are going to be comfortable. I had a comfortable chair and my computer in my office. I had an ottoman and side table as well. This allowed me to read, listen to music, and drink coffee/tea/alcohol in my place of self-isolation. Make sure you’re able to distract yourself and/or keep yourself busy.
  4. Find a hobby to spend your time on. I had two hobbies that have helped keep me sane. The aforementioned video games and writing. In the immediate aftermath of my ginger reaction, I wrote about 200 pages in a book I’ve been working on for about 2 years. I was able to finish it. I was focused alone and dealing with some shit. Putting that down on paper can help you process what’s going on around you. If you want to write a book, I suggest Scrivener. If you want to blog, setting up a free WordPress account could be perfect. Otherwise, pen and a notebook work just find. My wife has jumped into doing more art stuff. Most of these things are fairly cheap and can keep you busy for a long time.
  5. Change up your routine. This one is tough, but making slight changes to your routine can help keep you busy and reduce anxiety from being isolated. I suggest watching videos for a while, then switching to something else, like a book or articles, then moving on to one of your hobbies. This way you keep your mind occupied and from getting stuck in a rut of the routineness of whatever you were doing before.

I hope these ideas help you with your self-isolation. I still combat my own depression over my self-isolation with my allergies. So this list is far from perfect. I know some people are going to be hit really hard by the self-isolation and will have serious financial concerns on top of the above symptoms. It’s important in those cases to find inexpensive types of entertainment. Regardless, you must do self-care and meditation is a cheap easy way to do that.

Be safe out there. It’s going to get worse before it gets better. Wash your hands.