After spending over 20-years in the field of engineering,
there are many recurring themes I have encountered when working with imbeciles.
One of which, that makes me shake my head every time, is when someone (a moron)
makes the classic statement: “That’s over-engineered”. Now, if it were
coming from an experienced engineer, things would be different. But it never
does. Without exception, this statement is made by a person with absolutely no
technical background, education, experience, know-how, or any other skills of
value to society. Typically, the person that makes a statement like this will
be an overpaid bureaucrat-type with an MBA that only understands how to make a spreadsheet
for the purposes of determining profit margins and could care less about product
performance or consequences when a product fails. Worse yet, they probably get
a bonus for making products under-engineered to save a buck. These
people jump from company-to-company, outsourcing or otherwise undermining their
manufacturing, destroying the quality of their products and along with it,
their reputation. And they get paid handsomely for this service.
If you get stuck in a similar situation in your career, I
found the following simple statement and follow-up question can make people
rethink their desire to reduce quality for a slightly higher profit margin:
The Statement: “Nothing over-engineered ever broke.”
The (rhetorical) Question: “Will the reduction in quality
and resulting miniscule profit gain cover added costs of additional customer
service, warranty replacements, and risk of costly litigation?”
It all comes down to where business leaders want to invest.
Do they want to invest in innovation, engineering, quality, and manufacturing?
Typically, they don’t. And that is because the two driving motivators for the
modern American business leader are: Greed and fear. The greed is
self-explanatory, businesses need to make money to exist. And to some extent,
profit driven companies are a good thing (a separate topic). However, when you
add in the fear component, the combination of greed and fear becomes
problematic and ultimately destructive in the long run. Because the greed-fear
combination drives so many poor decisions in business, we have seen the rise of
government regulation. Regulation is the government’s own way of introducing a
disincentive, also often feared, to counteract the impulse to make poor decisions.
Sadly, this is needed more than most people would like to think.
The fear part is more complex. Long gone are the technically
competent business leaders like GE’s Jack Welch, who held a PhD and experience in
chemical engineering (he propelled them to the world’s most valuable company in
the early 2000’s). We have become overly specialized here in America, and most
C-suiters have been on some sort of siloed “leadership” track from very early
on in both their education and career. If there is one truism I have come to
appreciate (and fear myself), it is that people fear the unknown. Which usually
results in misguided hatred towards it, or at least, an uneasy aversion to it. I
mean seriously, is anyone other than an accountant happy to see a tax form show
up in the mail?
Because many modern business leaders are technically weak,
they fear investing in anything that might be out of their depth (which is
usually a lot). As a result, the investments we see being made in American
business are added customer service, sales, legal, accounting, marketing, and
lots of belt-tightening in the form of outsourcing and supply chain narrowing
(e.g., single/sole-source supply models). All of these things are easy to
understand and even the smartest person in any of these fields would have a
hard time pulling the wool over the eyes of any mediocre executive to get them
to make a bad decision. Investments in these spaces feel safe and the impacts
are felt immediately. If an executive narrows all their supplied components to
a single source, they realize savings via economy of scale, and that hits the
bottom line right away. Easy and profitable. Smart right? Not really. This is
narrow-minded, short-term thinking is negative side of greed getting the best
of us. Investments in innovation, engineering, quality, and manufacturing are
the exact opposite.
No matter what you do, or where you live in America, you
have seen the consequences of this failed short-term thinking play out in
recent years. Our fragile supply chain collapsed due to the disruption COVID-19
caused and we had shortages of just about everything. For one salient example,
just about every big business in America had outsourced their manufacturing of
semiconductors (i.e.- computer chips) to other overseas companies. The
manufacturing of semiconductors is challenging, requiring lots of sustained
investment in technically challenging areas and smart people. So of course, we
got rid of all that messy hard stuff here in America. Then when a global
pandemic hit, you couldn’t even buy a car that needed a chip to work, and all
those chips were being made somewhere else that was shutdown. Those mostly
assembled vehicles stayed inoperably stuck in a parking lot somewhere, costing
the automaker money for every day they sat there. And that costs you, the
consumer, money in the end. You pay more because the automakers need to raise
their prices to cover unforeseen costs and lost sales. And because supply
remains low with the same demand, they can easily get higher prices. Are you
enjoying your inflation yet?
How did this happen you ask? To start, not one of these
business wizards, with their fancy and expensive MBA degrees, considered making
a small but scalable production operation under their management umbrella on
their own shores “just in case”. They outsourced all of it. The
narrow-minded MBA-type thinkers have only learned some sort of canned risk
management in a classroom or a book. And they suck at applying it (if they try
to do it at all). Most importantly, they don’t get a bonus for long-term
investment strategies and risk management because they are long gone and onto a
new job, at a new company, by the time any long-term investment pays off.
The other side of this problem is our lawmakers,
politicians, and regulators asleep at the wheel or worse yet, complicit in the
formation of monopolies by allowing unchecked mergers and acquisitions. Again,
we have greed at play here. Because all of these elected officials, that are
supposed to prevent monopolies from forming to protect the American people, can
freely invest in any publicly traded company, they do. And why wouldn’t they?
There is nothing preventing them from doing so and becoming the ultimate
insiders. We can look at Amazon for one easy to understand example. Amazon was
able to sustain its operations at a massive loss for a long period of time
because of investments made in its stock. Do yourself a favor and do a quick
internet search for: “politicians invested in Amazon” (or any other big tech
company). If you really want to go down the rabbit hole on a rainy day, follow
that search up with digging into how many lawmakers responsible for the
oversight of Big Tech have kids that work directly for the companies they are
supposed to be regulating. Both the number of high-level elected officials and
family members involved, along with the dollar amount invested are disturbing.
Regulatory meetings or congressional tribunals for these mega cap companies are
more like special interest shareholder updates for government officials.
If you are sane, this should lead to many questions, such
as: If Hidgit were to start selling a product that became a smash hit on
Amazon, only for them to turn around and rip it off by creating an Amazon
Basics version with low-cost overseas manufacturing do you think anyone would
care? Of course not, Hidgit is not publicly traded so politicians like it
because that makes them more money and the consumers are getting a cheaper
version so they won’t care either. As a consumer, do you think you will get a
better price in the end now that the likes of Sears, Bed Bath & Beyond, and
a growing list of competitors that couldn’t operate with sustained losses like
Amazon have closed their doors? How about the endless list of acquisitions they
have been allowed to make? Amazon has enjoyed such an unfair advantage for so
long they now have their own fleet of delivery vehicles to cut out the likes of
UPS and FedEx. Think about that. Despite what Amazon and the politicians say,
if your business model is: “operate at a loss and get tax breaks whenever
possible until all your competition goes out of business”, you are not creating
jobs. You are merely consolidating jobs to into one company. I am not only picking
on Amazon here; it is a systemic problem across the spectrum of American
business. How many mergers and acquisitions and supply chain/manufacturing
consolidations did it take for us to have a massive shortage of baby formula
because just one mega cap company, Abbott, had a problem at just one manufacturing
plant? The problem is everywhere. And we all feel the effects every day.
Think about this infuriating reality: In some real and
measurable way, we are paying more for everything because of corporate America
paying for people to get more and more six-figure MBA degrees. The corporations
pay for the over inflated cost of an MBA, then write off that expense, thereby
passing the cost on to the taxpayers, thereby allowing the universities to
charge even more for that same MBA (which you as an individual can’t write off
anymore). These people are educated (with your money) to optimize profit (not
business operations). Then they get put in the driver’s seat at companies all
across America and all of the things outlined above happen. When bad decisions get
predictable results, the government attempts to step back in with a fix. They
try to help by importing everything from baby formula to medical supplies from
foreign entities as a stop gap. Then at some point, some C-suiters with MBAs
got together with politicians to ask some engineers what it would take to
reshore semiconductor manufacturing. Surely, without any technical know-how,
they were surprised to learn the extent of investment and timelines required to
do so. Now we have the CHIPS Act. While it is a step back in the right
direction, it should have never gotten so bad that it took a literal act of
Congress to try and correct all the steps in the wrong direction that led us to
such a weakened and compromised place.
America likes to lean back on having deep pockets, boasting
the World’s number one economy. While that does help with some things, it can’t
solve all problems. All the money in the world can’t buy you a time machine.
You can’t go back to put needed infrastructure in place when you suddenly
realize you need it. It already needs to be there and ready when you need it.
The most important piece of infrastructure is the human element. With
manufacturing goes the know-how. I don’t care if your product was expertly
“designed in California”. If you don’t know how to make it, it can’t be made. So,
no matter how much money we throw at things like the manufacturing of
semiconductors, we still need the human resources that make it happen.
If you want to read a great article by the WSJ that
demonstrates all of this perfectly in a recent real-world example, I highly
recommend John Keilman’s “Why America’s Largest Tool Company Couldn’t Make a
Wrench in America”. The story within the story is this: As of writing that
article in the summer of 2023, despite falling flat on their face with their
high-tech attempt to make something that used to be made in America again, the
shares of the parent company, Stanley Black & Decker, were up about 27%
since the start of the year. The message for American business leaders is
clear: You don’t need to know how to stamp out wrenches to stamp out huge
profits, so why bother with it? Just hire more MBAs, stop all attempts at
innovation, close your domestic plants, and wrap yourself into the comfortable and
snuggly blanket of complete foreign dependence, right? Well, it doesn’t feel
too comfy to me.
Money can build a factory quicker, and even buy the
technology from other companies to automate it, but it can’t develop competent
experts to run it. That takes time. And once it’s gone, it is really hard to
bring back. Craftsman learned that the hard way. We have been churning out things
like software developers because that is where the good paying jobs have been.
Shifting to churning out people that are adept at manufacturing semiconductors,
starting from scratch, will surely be a limiting factor to realizing any
benefit from the reinvestment the CHIPS Act will make. And after watching how
easily America discards manufacturing jobs, if I were a young person picking an
educational path, I would be weary to go into anything that specialized and
difficult. Especially, when you see your friends getting a much easier to
attain degree from a business school, having more fun, and getting paid a lot
more in the end!
Let’s go back to the beginning, where I said: “nothing
over-engineered ever broke.” This thinking can be applied to anything from
product design, building a supply chain, running a business, and even running a
government. If you are able to think for the long-term and properly calculate
for foreseeable risks, the systems you build are less likely to break. Better
yet, if you do things like making a resilient supply chain, one that you have
true control over, when things like global pandemics happen you can be in a
position to capitalize. You can become the sole supplier for a time when your
competition can’t. While it has become the catchy word in business for the last
decade or so, if you run too “lean”, you can’t adapt and pivot quickly if
needed. I don’t think of redundant systems or backups as “waste”. If done
right, I think of them as proper risk management and a wise long-term
investment so that you can capitalize when an unexpected opportunity arises. While
small companies might not be able to afford any redundancy, massive, publicly
traded companies should have it figured out and in place where needed so it is
there when it is needed. If you are fully dependent on the systems built by
others, you are going to be at their mercy and when they go down, you will go
down as well. Remember, while more profitable in the short-term, there is
always a downside risk to running as lean as possible.
Wow, I am a little depressed now. I was planning on making a smooth segue into why we made our Heavy-Duty Keyhole Hangers so “heavy-duty”. But this ended up turning into more of a rant on the sad state of American business and politics. Geesh, that escalated quickly! Well, if nothing else, I hope you gained a little non-MBA-type wisdom from the almost 20-year practicum a career in engineering has given me. To be clear, I am not talking about all people with MBAs or business backgrounds. I hate making blanket judgements and statements (like: "that's over-engineered"). So, don't go and get all offended on me if you have an MBA. I have plenty of good friends with MBAs. Some of these people are spectacular, incredibly beneficial to the companies they work for, and true geniuses. To give one positive example, watch the late Clayton Christensen's amazing and insightful lecture on "Disruptive Innovation" (he taught many MBA student's at Harvard). Even after suffering a stroke, this man was true business genius. If you don't have the time for an hour lecture (you should make the time), just jump to the 39:40 mark of the video and listen to his prediction for what will be important 10-years and prepare to have your mind blown (it's almost exactly 10-years from when he gave this lecture). He even covers semiconductors at the 49:00 mark with an uncanny, Nostradamus-like prescience. If you read this whole thing with linked articles and videos, you are a little smarter now, go ahead and microcredential yourself. But this post was entirely too negative to talk about our awesome new Heavy-Duty Keyhole Hangers in the same thread so I am going to break this into two separate posts. The fun and positivity are yet to come! I promise…
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