End of the Line

End of the Line

"The Japanese are very good about this - they compete in certain areas and in some they cooperate. In our country we use to have trade associations," Lynn says. "This is something that we have conveniently forgotten - that back in the 1920s, Herbert Hoover before he became president was the major mover and shaker within the trade association/chamber of commerce movement in this country, which would bring together all these firms so that they could talk to each other.

"They would coordinate what they needed government to do, so it's not something that's entirely unheard of. It's been done before; it's done in other countries. In these cases it makes sense for people, because one thing that firms have realized is, you know what, the contingency plans don't work. It's musical chairs."

Lynn points out that if a breakdown disrupts a supplier with 20 customers, it might end up with the capacity to service just three of those customers temporarily. The other 17 companies will be "screwed". Look at contingency plans that way and you realize that many of them actually count for very little. Such recognition can transform the way people imagine risk.

"If the boards realized that the contingency plans were not worth the paper that they were written on, then it would change how the boards deal with this. It would change the dynamic between the private sector and the public sector because ultimately there is a limit to what any firm can do about this. Ultimately the problem here is a failure of governance; that government here has not set simple, clear market rules that would enable the private sector to operate their machines, operate their systems in ways that are safe for the firm and safe for society."

Trade utopians love to argue that global interdependence forces nations to behave peacefully. Nonsense, Lynn says. Instead it can lead to conflict. That is just a fact of life. "Now we can all wish, and hope and pray, but it will happen at some point. There will be some kind of conflict; whether it's hot or cold it's just hard to tell," he says.

"To the extent that a firm has the power within the marketplace as now shaped to diversify its sourcing, it should do so. There may be a lot of cases in which firms don't have that power. In that case they should go complain to the government and say: 'Hey there is nothing I can do about this but I just put not only my company but the society that relies on me at risk'."

However, above all else, Lynn says, they should consider their sourcing vulnerabilities with cool, clear eyes, and take all steps to eliminate them.

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