Efficiency and resilience

I stood on the sidelines recently of a Facebook debate over online shopping vs. buying locally. The thing is, I sympathize with both sides of the debate–but I think both are incomplete. Two of the biggest considerations are efficiency of a system and resiliency of a system. Other effects, harder to quantify or predict but real nonetheless, matter as well–but let’s stay primarily with efficiency and resilience.

First, let’s consider efficiency. A few questions worth asking include what efficiency means, whether (or in what cases) it’s good, and what tradeoffs it includes.

To be efficient is to accomplish a goal with a minimal investment of resources: time, money, energy, labor, or whatever you consider. Thus, to say a system is “efficient” is always to say that it is efficient in accomplishing [some effect or product]while minimizing the use of [some input], in [a specific environment].  Efficient use of one resource often involves the use of other resources or the introduction of other costs. For example, inter-state travel takes less time than it did in the era of the Oregon Trail, but at the cost of natural resources (petroleum fuel), environmental quality (pollution, paved roads), and even social capital within local communities. The system is designed to work “well” in an environment where energy is relatively inexpensive.

(A disclaimer here: a lot of this article blurs the lines between efficiency as described above and efficacy, the simple act of getting things done without reference to the particular costs. I think it’s a fair “blurring” for our purposes, but it is a blurring.)

Efficiency is in itself amoral, but its goals, costs, and benefits are matters of ethics. The Third Reich, of course, was quite efficient in achieving its deadly goals, which we see as evil. Adam Smith and Henry Ford, in valuing specialization, made manufacture of material goods more efficient (and thus more broadly available), with a culture of “artisanship” a casualty, and substantial changes to societal organization. Facebook and Google are increasingly efficient at targeting ads, again re-distributing influence and power. In farming, capital allows ultra-efficient production of crops with respect to human labor–which in turn empties rural communities into cities across the world. Efficiency may be evil, it may be good, but it’s often mixed.

An “efficient” system is generally efficient in a specific environment. Examples abound from various contexts:

  • Darwin’s revelations about finches arose from their varied beaks, each adapted to the particular food sources available to it.
  • Artificial-intelligence systems gain “intelligence” through training. If you train a system to identify butterfly species by showing it many thousands of images of butterflies, it will probably get better and better at making such identifications.
  • Borrowing to invest in real estate, in an era of increasing real-estate prices, is efficient. It makes money, with minimal research required. The same is true for stocks.
  • In the era leading up to the American Civil War, the North became efficient in its use of human labor, substituting capital. The South, with abundant slave labor, was “efficient” in producing a lot of cotton (and money) with little technological capital.
  • For the average 20-year-old, major health insurance is an “inefficient” expenditure–they’ll probably not need it, and if they don’t need it it’s an unnecessary drag on their financial future.

Efficiency usually comes from specialization, a particular emphasis on some areas and de-emphasis of others. When contexts change, though, “efficient” systems often don’t handle the changes well.

  • A finch with a fine beak that’s terrific at drilling into cactus fruits will suffer if the cactus population falls to disease.
  • If your AI butterfly-ID system has been trained on entomological specimens, it might conclude that anything that doesn’t have pin in it with its wings wide open isn’t a butterfly.
  • Leveraged investments in real estate worked well, until they didn’t. You know how 2008 worked out.
  • In the American Civil War, it turned out that manufacturing capacity mattered a whole lot more in a conflict than did cotton production.
  • For the 20-year-old without health insurance, a major health problem can quickly turn “efficiency” into financial disaster.

Higher levels of efficiency often go with higher levels of fragility. We can tune a system to run really, really well (however we define that) in a given environment–but our environment keeps on changing. It’s worth something to reduce the likelihood that a system will crash and burn–in other words, to invest in resilience.

Warren Buffett noted years ago that his first rule of investment is to “never lose money”. He noted as well that any number multiplied by zero is zero–and he has amply demonstrated a willingness to pass over “great investment opportunities” that offer too high a risk of going to zero.

Resilience has value. It even has monetary value, as demonstrated in the insurance, the options, and the futures markets. But the value of resilience goes beyond that–resilience in political systems and social capital has value of its own, even if it’s hard to quantify or monetize. And resilience, over the long term, is essential to maintaining whatever sorts of efficiency a society wants.

Efficiency has value as well, if its goals are good and its trade-offs are understood and reasonable. And a society that’s “efficient” in offering material, spiritual, social, and psychological “goods” will likely be good at achieving resilience as well.

What does this mean for the Amazon-versus-local-shopping debate? You decide. I don’t have comprehensive answers. I do have a few assorted thoughts, though:

  • I love the empowerment and efficiency that Amazon gives me (along with other online stores), and the fact that everything is available.
  • I love the accessibility of local stores, the chances for people to engage the public in their own right rather than as part of a large corporate system, and the chances for multifaceted personal connection as the same people interact in business, in community organizations, schools, and worship communities, as neighbors…and overall, as people rather than as economic units. I’m willing to pay a “tax” to keep this community thriving.
  • Amazon isn’t evil. Amazon is far from an unmitigated good.
  • Local shopping offers much good. It’s far from perfect.
  • We need to keep on engaging this issue on all sides.
    • Local stores can’t stagnate, or they’re complicit in their own deaths. (I went looking for ways to purchase online–or even browse–stuff from Hutchinson-area stores, and came up basically empty. Bluebird Books, with their online presence built on a national platform for independent bookstores, was the shining exception.)
    • On the consumer side, a constant search for the bottom dollar will make it really difficult for local businesses to succeed, with real losses to a community.
    • As utopian as the idea may seem, the online-shopping giants would do well to figure out how to partner with local communities and businesses, rather than just “disrupting” them.

Your thoughts?


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