[FoRK] The World Is Not Flat

Stephen Williams sdw at lig.net
Tue Jan 19 15:57:26 PST 2010


Ken Ganshirt @ Yahoo wrote:
> Hi Stephen,
>
> I'm afraid I don't get your point. 
>
> You said: "Actual distance is a red herring now because of hyper-efficient shipping.  Intermediaries in many cases are only there when they are more efficient than the alternatives.  Commercial distance is a metric of time and money which is only loosely connected to actual distance."
>
> I agree. To all three points in that paragraph. But, so what? 
>
> You call actual distance a red herring as if it's something someone else raised. But yours is the first mention of it as any sort of issue.
>   

JB raised a number of issues, explicitly and implicitly.  By multiple 
examples of distance traveled and mentioning boundaries crossed, 
distance was put on the table as something bad.  And you would think 
that it would be, if it weren't outweighed by specialization for one 
reason or another.

JBone said:
> In fact the world is very different;  it is characterized by 
> increasingly-long supply chains with increasing intermediation and 
> very different characteristics among its edges.  E.g., that thing you 
> ate for dinner last night, if in the US, had components with a mean 
> distance between original producer and ultimate (literal) consumer of 
> about 2000 miles and something like 5-6 intermediate hops.  That 
> finished good Joe Consumer buys at Wal-Mart has much fuzzier stats but 
> in many cases has a supply-chain path that extends order-10,000 miles, 
> crosses national boundaries 4-5 times and has a dozen intermediaries. 

> You also said: "I think you have to separate out the commercial equivalent of "all traffic flows through the highways" kind of traffic from true intermediation points."
>
> Sure. But, again, so what? How does any of that relate to any of my comments or questions? Clearly I've missed your point completely. 

I was responding to JB's original message on those points.  I was 
actually more agreeing with your resistance metaphor than disagreeing 
with anything.
> ... Or you've missed mine? because nothing I said depends on real distance or any analogue thereof. I'm talking about "resistance" at the intermediation points due to a host of factors. And even in my single example of transport, the "resistance" would not be measured by distance but, rather, by the ratio of value the transport adds to the good versus its cost. Just as, similarly, you would measure the "resistance" caused by a purely speculative purchase and resale of a contract for that good by the ratio of the value added (if any) by the speculative transactions versus their cost.
>
> If there's an analogy in the back of my pea-brain it's more likely the resistances - individual and aggregate - of components in an electronic circuit. I hesistate to mention it except to try to convey what I mean by "resistance" at the intermediation points. There is no other useful information to be drawn from it.
>
> In assessing resistance of intermediations, as a metric, I'm suggesting that the factors in assessing the resistance would be something like the ratio of:
>
> a) the value added to the good by an intermediation, TO
>   

As long as you include as "value added" the savings over alternate paths 
to the market or saved inefficiencies over less capable local 
suppliers.  An intermediation may not add value, any more than a wire 
adds current, but it can be the least resistance path between a source 
and a sink.
> b) the extraction from the available aggregate margin of the good by an intermediation.
>   

As long as there is competition, this is the price of an incentive to 
create a less resistance path.
> Yeah, I know that's a silly ratio because the higher the ratio the lower the actual resistance, e.g. the higher the ratio the more beneficial the intermediation. 
>   

In other words, the higher the existing costs, the higher the incentive 
to go into business to lower those costs, benefiting everyone.
> This would apply to direct intermediations, like transport, processing, packaging, storage. To indirect intermediations like speculative trading of contracts for the good, marketing activities. And to doubly indirect intermediations such as Jeff discussed, like regulatory or other barriers to entry/innovation/competition.
>
> All will have a real incremental (positive, neutral, negative) impact on the value of the good. All will have a real incremental (positive, neutral, negative) impact on the available aggregate margin of the good. 
>
> I'm pretty comfortable that none of that has anything to do with distance, so what have I managed to overlook?
>
>        ...ken...
>
>
>
> --- On Tue, 1/19/10, Stephen Williams <sdw at lig.net> wrote:
>
>   
>> From: Stephen Williams <sdw at lig.net>
>> Subject: Re: [FoRK] The World Is Not Flat
>> To: "Friends of Rohit Khare" <fork at xent.com>
>> Received: Tuesday, January 19, 2010, 2:11 PM
>> Ken Ganshirt @ Yahoo wrote:
>>     
>>> --- On Tue, 1/19/10, Jeff Bone <jbone at place.org>
>>>       
>> wrote:
>>     
>>>    
>>>       
>>>> ...  All value flows towards the middle of
>>>>         
>> the
>>     
>>>> network...  and all the while the dynamic
>>>>         
>> equilibria of
>>     
>>>> the network is increasingly undermined, requiring
>>>>         
>> higher and
>>     
>>>> higher (potentially unsustainable) "input energy"
>>>>         
>> (i.e.,
>>     
>>>> economic resources and non-economic forces
>>>>         
>> applied) to
>>     
>>>> maintain any appearance of stability.
>>>>
>>>>      
>>>>         
>>> Appealing. That last makes me think there's a
>>>       
>> relationship between that and the "casino capitalism" that
>> was recently mentioned and the whining I've been doing about
>> related activities of gamblers-not-traders in things like
>> commodities markets and elsewhere. There's a holistic thing
>> going on here that I can't get my head around but I can feel
>> it. Yours is the first articulation I've seen of something
>> that makes it fit somewhere.
>>     
>>> Do you suppose there is a tie-in of these things in
>>>       
>> the above aspect of Bone's developing Theory of General
>> Relativity as applied to Distribution Networks?
>>     
>>> That is, to the extent that these activities are
>>>       
>> intermediation points in distribution networks but add
>> little or no value, do they add to the "resistance" implied
>> by the above, similar to, say, resistance to market entry? 
>>     
>>> Raises the first question: Are they intermediation
>>>       
>> points? (I think so, but...)
>>     
>>> Does the theory extend to assigning "resistance
>>>       
>> values" to intermediation points? E.g. the more value an
>> intermediation point adds, versus its cost, the less
>> "resistance" it adds to the network? E.g. a transporter is
>> physically moving a good from one location to another at a
>> fair market price, thus adding relatively lower resistance.
>> Versus, e.g. a commodity speculator who simply buys and then
>> resells a contract for the same good and peels off some of
>> the available aggregate "margin" while adding little or
>> nothing to the movement of the good from source to sink or
>> to its value and thus adding relatively higher resistance.
>>     
>>>    
>>>       
>> Actual distance is a red herring now because of
>> hyper-efficient shipping.  Intermediaries in many cases
>> are only there when they are more efficient than the
>> alternatives.  Commercial distance is a metric of time
>> and money which is only loosely connected to actual
>> distance.
>>
>> Just a few data points: It cost me 3 times as much to move
>> a container from the East Coast of the US to the West Coast
>> as a couple moving a container from Mountain View, CA to
>> Israel.  5 years ago, from DC via email and a trip to
>> the bank, I paid the factory directly for and drop shipped
>> 30 specialty computers to Honolulu, arriving just 2 days
>> before I assembled and installed them.  No customs
>> costs or brokers needed and my client saved about 40% over
>> the US distributor that I ordered samples from.  Cheap
>> items are sold on eBay and shipped directly from Taiwan or
>> Hong Kong for a few dollars of postage.
>>
>> Sure, I have an awesome farmer's market in every small town
>> around me a couple days a week.  Hard to find that in
>> the winter on the East Coast.
>>
>> For some things, we have it great today compared to the
>> past.  Walmart / Target / CostCo have many things
>> impossibly cheap.  There are aggregators for Chinese
>> electronics junk/semi-junk that mean you can buy all kinds
>> of gadgets cheap.  You can easily buy directly from
>> in-country supply chain aggregators,
>>
>> Where is it worse?
>>
>> I think you have to separate out the commercial equivalent
>> of "all traffic flows through the highways" kind of traffic
>> from true intermediation points.
>>
>>     
>>> It seems the former (transport) would be something on
>>>       
>> the "edge" and the latter (speculation/gambling) would be
>> part of the jam-up in the "middle" that you mention.
>>     
>>> That last statement is probably wrong on two counts in
>>>       
>> that I'm inferring "jam-up" but you did not state it. And,
>> there is likely no relationship between a resistance metric
>> of an intermediation point and its location on the network.
>> Or is there?
>>     
>>> Which, then, causes me to ask what you mean by "All
>>>       
>> value flows towards the middle of the network..." ("value"
>> is such a mushy word), or at least why you say that? 
>>     
>>> Is this (middle of the network) where the relative
>>>       
>> difference between value-add [little...lots] versus the
>> quantity of available aggregate margin extracted
>> [little...lots] creates the highest resistance to transit of
>> the network by the good from source to sink?
>>     
>>> By the way, are you still having problems with my
>>>       
>> paragraphs not wrapping? If so, would a switch (by me) fom
>> Yahoo to Gmail make a difference? Simple enough to do if it
>> will fix it.
>>     
>>>    
>>>       
>> Still fine with Thunderbird.
>>     
>>>           ...ken...
>>>    
>>>       
>> sdw
>>
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>>
>>     
>
>
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