Supply Chains, Shortages, Monopolies & More

This week I’m highlighting some interesting articles and podcasts that I’ve been reading and thinking about. A little different than our normal format, but lots of good content.

Next week we’ll be reviewing our next book since it is the end of the month, so get ready for that.

ShortageWatch: "Sorry. No French Fries with any order. We have no potatoes." (Article) -

My wife and I were talking yesterday about her difficulty finding egg rolls. She loves egg rolls but hasn’t been able to find them at any grocery store recently. That’s been a running theme over the past year-and-a-half. The pandemic has exacerbated issues with supply chains and exposed some fundamental flaws with the underlying systems.

One culprit is the food distribution industry, which is highly consolidated (due to the standard litany of anti-competitive tactics like mergers and exclusive contracts with customers and suppliers). Problems at some of the biggest firms, like Sysco, have even forced summer camps and restaurants in some areas to shut down.

Burger King uses McLane distribution, a leading firm for grocery distribution. McLane is having trouble recruiting drivers, which is a clear problem everywhere. You’ll hear a number of causes for this shortage, from poaching by Amazon to a large number of truckers retiring rather than be on the road during the pandemic.

In many industries, we’ve become too reliant on a few key providers. If something happens (like a pandemic, or a natural disaster), it can knock the entire system off the track. And we won’t have egg rolls. Or enough toilet paper. But it gets more serious than that. Lumber prices skyrocketed this past summer, which was a bummer since we were trying to do a bunch of projects, but it caused price jumps with construction everywhere. And we saw what happened early in the pandemic with masks. But pharmaceutical production is also concentrated. So shortages or problems can delay life-saving treatments. And that is a big worry for the future.

Pandemic unemployment benefits are ending, but for big companies, labor shortage worries aren’t

Many thought that unemployment benefits were keeping people from working. But data is showing that wasn’t entirely the case. There have been some structural shifts in the job market. And labor shortages are continuing even as benefits end.

We touched on this briefly a few months ago, but I expect that this will persist for years. Maybe longer. Many people have gotten out of jobs they didn’t want to be in, and are not eager to return. Maybe they’ve skilled up, or found something else. And it will take a lot to get others back into some of those service jobs.

Hard to quantify factors also remain a complicating factor in the labor market and reason for firms to remain on edge when it comes to hiring leverage. Among these factors, the idea that there is a “great resignation” taking place among America’s workers and a general reconsideration of life and work priorities during Covid cannot be discounted, even if hard data is lacking.

There are likely other structural shifts at play too. It will be interesting how it all plays out.

Apple's metronome (podcast) -

Apple continues to release new stuff, just like it always does. But the more interesting stuff is that we continue to stumble toward a new app store model. The Epic vs. Apple trial didn’t blow things up, but put an enormous crack in the wall.

No one knows what the new model will look like, but the 30% app store tax that Apple and Google have been taking seems like it is over (or will end soon). And that is a good thing. Not that we should transfer it to Epic or Spotify or Netflix, but we’d all love to see that massive tax reduced significantly, especially for smaller companies and developers who rely on the app stores for their livelihoods.

The Apple vs Epic ruling will change gaming forever

“The Apple versus Epic court case came to an end not with a bang, as so many expected, but with a whimper. While the court ruled in Apple’s favour on eight of nine counts, it ordered Apple to remove restrictions banning developers from linking to alternate payment systems in their apps, a move that will in turn let them dodge Apple’s much-criticised 30 per cent commission, as well as the total dominance the App Store has over gaming on iOS. That’s big in itself – but what happens next could be far bigger.”

Facebook is the AOL of 2021

If you listen to our other podcast, Product by Design, you’re familiar with some of our complaints about Facebook. It does some things right, and a lot of things wrong. Facebook has capitalized on its network effect, since most of us are there in some way. But how will we continue to live in these types of digital walled-gardens in the future?

That was a question my wife and I were debating over lunch the other day. We each ought to own our data, and our online personas, much more than we currently do. And in the future, hopefully we will. But who will build that type of environment? And how will each environment interact with each other? Will Facebook continue to be walled off from other networks? Will the future networks do the same? It doesn't seem like that is the path forward…

Xi Jinping’s crackdown on everything is remaking Chinese society

Almost no one, and no business, seems to have been spared in the recent changes to Chinese society. According to the Washington Post:

“The orders have been sudden, dramatic and often baffling. Last week, “American Idol”-style competitions and shows featuring men deemed too effeminate were banned by Chinese authorities. Days earlier, one of China’s wealthiest actresses, Zhao Wei, had her movies, television series and news mentions scrubbed from the Internet as if she had never existed.

“Over the summer, China’s multibillion-dollar private education industry was decimated overnight by a ban on for-profit tutoring, while new regulations wiped more than $1 trillion from Chinese tech stocks since a peak in February. As China’s tech moguls compete to donate more to President Xi Jinping’s campaign against inequality, “Xi Jinping Thought” is taught in elementary schools, and foreign games and apps like Animal Crossing and Duolingo have been pulled from stores.

“A dizzying regulatory crackdown unleashed by China’s government has spared almost no sector over the past few months. This sprawling “rectification” campaign — with such disparate targets as ride-hailing services, insurance, education and even the amount of time children can spend playing video games — is redrawing the boundaries of business and society in China as Xi prepares to take on a controversial third term in 2022.”

Sometimes I try to imagine something similar in the U.S. and what the response would be. We won’t go there, but it’s an interesting thought exercise. And not because America is the opposite. Rather, because the response would be varied and confused, based on so many factors.

The Paradox of Choice - Less but Better (podcast) -

Having more options may seem better, but is it? In this episode, we explore the paradox of choice—when having too many options actually slows us down and paralyzes our decision-making. We discuss why we end up with too many features in our products and what we can do to avoid creating feature overload for our customers.

This is a fun topic to explore. I deal with it frequently in my work, and also in my personal life as I talk about in the podcast.

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