Tuesday, January 28, 2014

Economy, Ecology, Efficiency, Catastrophe

Flying during the winter months has become an increasingly dicey proposition in 21st-century America. I make a handful of work-related plane trips a year, but the ones I do make tend to be for things that can't be rescheduled easily and often can't be rescheduled at all. I'm sure this is true for travelers in other kinds of business, but it's certainly true for academics: if you don't get there on the right day, the thing you were traveling to do may simply never happen. And American airlines can't quite promise to get you where you need to go any more, for reasons that have both to do with changing weather patterns and with a set of catastrophically-shortsighted business strategies that have become accepted as normal.

I'm not talking about the occasional weather-related delays. Sometimes, Mother Nature doesn't want you flying any planes for a while, and that will always be true. What I'm talking about is the cascading delays that turn bad weather in one place into system-wide disruption and strand travelers for two or three days, and sometimes even longer, after the weather has returned to normal. And we now have such system-wide delays just about every winter.

The annual MLA conference was held in Chicago this year just after the end of the first "polar vortex" event in January, which closed the Chicago airports and tied up airline travel across the country. The MLA is a massive academic conference for literature and foreign-language teachers. More importantly, the convention is key place for job interviews; young lit scholars looking for a job need to go to MLA as part of their job search. And of course, nobody trying to find a first job in the terrible academic job market wants to miss a job interview; even the interviews are hard to come by.

But of course, some people didn't make it to MLA this year, because the airlines couldn't or wouldn't get them there. The extreme cold was the official reason. But in fact the cold had begun to relent, and flights had started again BEFORE the conference began. The problem was the airlines could not move the passengers who had  been scheduled to fly over the previous two days.

I flew to Chicago the day before I needed to be there, building in extra time to my travel schedule because, hey: Chicago in January. And I got there without trouble. But if I had left earlier, I would have arrived later, or not at all. I flew after the airports had reopened; people who were scheduled to fly before that had to wait for open seats on later flights, but the airlines are intensely focused on not having any empty seats, so those waits stretched for days. Someone I was supposed to meet in Chicago never arrived; that person had scheduled a flight a couple days ahead of the conference, couldn't get rebooked until two days after the conference started, and decided that there was no longer any point in going. All of this person's crucial appointments were going to be broken anyway. Why fly someplace for business if you can't get there on time to do your business?

There are two important lessons here. The first is that the words ecology and economy share the same root for a reason. The ecology is the foundation that any economy is built on, and if you disrupt one you disrupt the other. If you're having extreme weather events every year, they will damage your economy. Crops get damaged. Supply lines break. Basic economic activity, like shipping, gets interrupted. You can't neglect the Earth for the sake of business. It's the only place business can happen.

The second lesson is that our basic American business model is ill-suited for an environment that has to cope with so many challenges. Our current business doctrine is obsessed with efficiency, which means low operating costs. Efficiency sounds great, in itself, but in effect it means a focus on doing away with "excess" capacity. An "efficient" business is one set up to operate smoothly on a normal day, but to completely fall apart in the face of unforeseen demand.

The goal of "efficiency" is not to have any more capacity than you need. Businesspeople are taught not to have any more inventory, equipment, or employees than they need to meet immediate demand. They are taught to employ the absolute minimum number of people they can get away with, and view the damage caused by being shorthanded when things are busy as less than the economic "loss" caused by employing a slightly larger staff. And businesspeople are taught the just-in-time inventory approach, pioneered by Toyota, which teaches that stocking inventory in advance is financially wasteful because it ties up money that could be used for something else in the meantime. Never have three spare parts in the back room when you could have just one, or better still have none and have it delivered the day you need it. If you're selling hamburgers, you should have enough burgers in the freezer to get you to the next delivery; stockpiling an extra week of frozen burgers is seen as an unnecessary cost.

One of the problems with this model is that minimizing spending minimizes the business's stimulus on the rest of the economy. Fewer employees get paid. Vendors make money later, which slows down their own purchasing. (The financial return you go by holding onto cash for a few extra weeks is exactly the return that your vendors would have gotten from getting the cash a few weeks earlier.)  So when everybody follows this strategy, it creates recessionary pressure.

The other problem is that this approach is fragile. Just-in-time inventory demands that the delivery network always work seamlessly. If the part you ordered doesn't come, you're stuck. If the delivery truck doesn't show up with the next load of burgers, you're closed until it does. The more "efficient" the business, the less it can cope with disruptions.

The airlines have been pursuing the just-enough, just-in-time approach hard for years now. Their ideal goal would be to fill every plane, every time. That's efficient, in that it gets the most out of their planes and their people. Extra planes and extra pilots are, from the airline's point of view, just a drain on the bottom line.

The problem is that when, all-too-predictably, operations get disrupted, there is no slack in the system to deal with the problem. This is because the airlines have worked hard to take all the slack out of the system. Air travel in this country is designed to make the airlines maximum profit on a good-to-normal day. But this means not being to cope at all on the bad days. When your flight gets cancelled, the airline doesn't have seats on the next flight or the one after because they deliberately set out not to have open seats on any flights. When your flight can't take off because of a malfunctioning part, there isn't always a spare part handy, because stocking spare parts is considered thriftless. There certainly isn't an extra plane that can replace yours. And, once the delays start piling up, there aren't any extra pilots, because the airlines employ as few pilots as possible and schedule them for nearly as many hours as they're legally allowed to fly. Once the delays start piling up, the pilots start to hit their maximum hours and there's no one to fly your plane. This is "efficiency" in action."Just in time" means everyone is delayed.

The economy in the 1950s and 1960s operated differently; thinking was still shaped by the Depression, where people got too much experience of scarcity, and World War II, where there was no such thing as too much material at the front. The idea of having backups and reserves was not seen as inefficient, but as prudent. The point was to be ready for an emergencies. Our current business wisdom is NOT to be ready for unforeseen emergencies, because it's too expensive. So we just have to wait out each catastrophe, long after we they have stopped being unexpected.

cross-posted from Dagblog

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