Lean Manufacturing and Production Principles
No one enjoys chaos. Over the past couple years I have come to appreciate the tremendous value of principles. Living life by a set of rules that are general, powerful and not overly prescriptive allows for a structured approach to all the vicissitudes that we face. I believe that many of us unconsciously develop principles over time. Our principles are typically derived from our family, culture and experience, but too often our principles are not consciously created – they are created by osmosis. This path can lead to a number of problems as the principles we adopt from our culture may be in contradiction with principles our heart actually wants to follow. This contradiction can then lead to a myriad of issues and conflicts with others. The intentional development of personal principles seems to be an essential ingredient to a happy and healthy life.
The concept of principles is anything but novel. The Ten Commandments are principles, Seneca set out moral principles in his letters to Lucilius, government constitutions are principles and we can find principles in documents created over the ages. If we define principles as, “a fundamental truth or proposition that serves as the foundation for a system of belief or behaviour or for a chain of reasoning.” then the world is full of systems of belief that are both overlapping, compatible and often highly incompatible. The challenge in life is to find the principles that allow you to succeed, feel fulfilled and lead a good and moral life. This is perhaps the greatest challenge any of us face.
Principles can be morally good, bad or indifferent. Principles can be dogmatic or flexible. Principles can be immutable or evolve over time. Principles can be related to our morality, to our societies, to science, to our businesses or to our operations. They can be strategic and they can be tactical. In short, we can create principles for nearly anything. So far, I have begun to ween away some principles that I may have absorbed through my environment and I have begun to intentionally select the principles I wish to live by. At 37 years old, this seems late in the game and it would have been nice to realize all of this at a younger age!
The one set of principles that I can confidently say I believe in are the principles of Lean Manufacturing. The five key principles of Lean Production/Manufacturing are:
- Value – Specify the value desired by the customer. “Form a team for each product to stick with that product during its entire production cycle”, “Enter into a dialogue with the customer” (e.g. Voice of the customer)
- The Value Stream – Identify the value stream for each product providing that value and challenge all of the wasted steps (generally nine out of ten) currently necessary to provide it
- Flow – Make the product flow continuously through the remaining value-added steps
- Pull – Introduce pull between all steps where continuous flow is possible
- Perfection – Manage toward perfection so that the number of steps and the amount of time and information needed to serve the customer continually falls
As simple as these may sound, they are exceedingly difficult to follow and implement. These principles can be applied to many aspects of our day to day lives, but they are restricted to the operational realm. These principles help ensure operational excellence within an organization or a process. They do not touch many other parts of our lives. On top of these principles, Toyota (and other companies) have built complex and rigorous systems that allows them to deliver goods and services at remarkable costs. The complexity of a modern gasoline car is truly astounding its low cost could never have been predicted 50 years go. Following Lean principles can also help individuals reduce their wasted money and improve everything from home renovation projects to emptying the dishwasher.
As with other sets of principles the danger is that these principles can lock you into a system that has limitations. Within a system, you can embrace these principles fully but when there is a paradigm shift you will be left behind. Toyota is still the best car company in the world, but the future likely belongs to Tesla. Blockbuster may have embraced lean, but Netflix crushed them. The Catholic Church ruled the world until Copernicus determined the earth was not the centre of the universe. When the underlying rules change or when a new technology emerges, the principles you held need dearly to be seriously re-evaluated. Changing your principles may be the only thing harder than setting them in the first place.
I am still toying with a variety of principles for life and happiness, it’s complicated, but I will keep you posted as we progress.Published on July 19, 2020
The Return of the Road Trip
I have travelled around the world – Ethiopia, China, Italy, Mexico and many other places. In all of these countries, I visited amazing cultural and geological sites and had fantastic experiences. Coming from Canada where there is limited cultural sites compared to ancient civilizations, it is very common to travel overseas. With COVID heavily restricting travel we decided to do a road trip near home.
Even though we decided to stay near home, we initially thought of visiting the maritime provinces of Canada – Nova Scotia, New Brunswick and PEI. Unfortunately (or fortunately) the borders to these provinces were closed or restricted, leading us to stay within our home province of Quebec. With our ten month old son, we charted a two week road-trip that would mix hotels, camping and rustic camps in 4 provincial parks.
Leaving from Montreal, we headed to the Eastern Townships and continued along the way to Mont-Megantic national park, camping two nights on the mountain. It was a beautiful park with lush forests, fresh rivers and clear skies. The mountain has an observatory at the top and the entire region dims their lights at night so people can clearly observe the cosmic universe. We had to hike three kilometres up the mountain to get to our shelter, with baby, gear and water in tow. Through the sweat and effort we started to loosen the mental shackles of our urban living. After two nights on the mountain we descended and went to visit a friend who had a hunting lodge nearby.
A key part of our trip was not only to visit amazing sites, but also to visit people along the way. Friends, Friends of Friends and professional contacts were spread out along our trip, allowing us to learn more about the local communities and change up the limited conversations we could have with our ten month old! People are as fascinating as any national park and the diversity of people and sites helped make this trip amazing.
We then headed through the region of Beauce and stayed one night in Kamouraska, on the banks of the St. Laurent river. A cute village with delicious fish and lovely cafés, it was a perfect spot to recover after our brief stint of mountain camping.
From Kamouraska, we headed down the St. Laurent to Rimouski where we visited the Parc du Bic and the Jardin de Métis. Both sites were amazing. The Parc du Bic is a peninsula and island in the St. Laurent with stunning views and shorelines, it is truly worth a visit. The Jard de Métis is a large English Garden that was started by the President of CP Rail, but is now run by the government. In Rimouski, we had some delicious microbrews and food and visited the parents of a good friend of ours. After two nights, we continued our journey along the river to the Parc de la Gaspésie.
The Parc de la Gaspésie is near the end of the Appalachian trail that starts in Virginia and contains thousands of kilometres of hiking. I had been to this park twice during the winter to do back-country skiing, but it was my first summer visit. Despite modest peaks of 1000-1200 m, a good portion of the hiking is done above the tree line and you have amazing vistas of dozens of untouched mountains that continue into the sunset. If there is one thing you can say about Québec, it’s that we have a lot of space! This park is famous for its moose, of which we saw one and for its wild side. With a ten month old we had limited hiking times, but we still got to see some amazing views. After three days in the park, we headed down and back to the seaside town of Matane.
From Matane took a ferry (that went way over budget) to the North Shore of the river. Landing at Baie-Comeau, we drove half an hour to Pointe-aux-Outardes Nature Park, a beautiful peninsula that has long sandy beaches and rich wetlands full of birds. The Park is managed as a non-profit organization and has great paths and explanations as well as a variety of camping options. We camped out on the beach for two nights where made fires and swam in the St. Laurent. It was a truly magical place and I highly recommend a visit if you are in that neighbourhood. From there, we drove back up the river to Tadoussac, famous for its whale watching.
In Tadoussac, we hiked down the sandy dunes to swim in the rather frigid, but crystal clear water of the St. Laurent and the mouth of the Saguenay river. Tadoussac is a cute village with another amazing microbrewery. There seems to be a great brewery in each town we visit – what a coincidence! From there we took the short ferry to St. Siméon.
Near St. Siméon we visited a friend who had a lovely farmhouse and ate lots of her cookies while observing an amazing view of the Charlevoix region. We continued though Malbaie, to the national parc at the Hautes Gorges de la Malbaie and then into Baie St. Paul. We were fortunate to follow a porcupine through a garden and then bumped into old friends of ours. We had drinks together and I discovered that you can make eau–de-vie from leftover milk! Who knew? Charlevoix is already known as beautiful place, so I do not think I need to further promote it!
From Baie St. Paul, we went through Quebec city to see the exhibit on Frida Kahlo and Diego Rivera, and then drove home.
If there is one thing that came from this road trip, it is the realization that you do not travel the world to see amazing things and eat delicious food. With Google and online reservation systems it has never been easier to travel. We booked things as we went and changed our plans based on the weather. At least in Québec and I would say Canada, there are truly stupendous things to see. All you need to do is get in your car and drive!Published on July 12, 2020
Was that the Peak?
Every system has its limits. With the current coronavirus economic shutdown, I am starting to wonder if we just saw, experienced and passed the peak of our current economic system. Looking back through history we often see people and societies who thought they were living in remarkable times, but in reality their times were no more or less remarkable than others. That is, we have a tendency to overestimate our own importance and the importance of the times we live in. In nearly all situations that assessment is correct. Things do indeed usually revert to the mean. Crisis after crisis seems at first to be a shift, but within months things are nearly back to the way they were. But when we look closer, each crisis creates a crack in the windshield of the system. In general, the windshield holds, but eventually all windshields break. When that happens there can be a dramatic restructuring of society. We can only truly determine this after the fact and more often than not these large transitions are driven by war and destruction.
The last truly great world shattering event was the collapse of the Soviet Union and the OECD countries have not had a major structural change in nearly 70 years. The last great social transition in the capitalist world was caused by the two world wars, which one could easily argue were in fact one war with a pause in the middle. The world before WWI was still a world of aristocrats, empires, and a very unequal society. When this world finally came crashing down at the end of La Belle Époque/Gilded Age (1880-1914) it cost nearly a hundred millions lives. The first world war marked a clear and final transition from an agrarian and aristocratic society to a liberal and industrial society. This transition had been ongoing for a hundred years with the inventions of steam power, locomotives and electricity. But it took the war to begin that final transition.
The first world war left many issues unresolved, particularly in Europe. It took a brief time of peace and then another global conflict to conclude this transition to the new world order we still live in. The transition was only complete after the second world war when Europe’s economic capital and its political capitals had be decimated. This opened a financial and economic space for workers and the middle class to rapidly build capital and political power, creating progressive social democratic states that dramatically improved the health and wealth of most of their members. Since this momentous transition we have continued along a path has seen bumps in the road, but whose trajectory has been fairly steady. After the post-war booms, we began to liberalize and privatize our economies all while offering greater civil liberties for individuals. This trajectory of progress did see a notable economic inflection point in western societies in the 1980s.
It is now very well documented that during the past forty years wealth creation has disproportionately favoured the richest instead of the working population. There has been a slow but steady transfer of wealth from the workers and to the capitalist class – the class of people who own the capital. Workers have kept up their lifestyle by taking out additional debt and by counting on the appreciation of the values of their homes, which have generally increased in value faster than wages – un untenable long term trend. This inversion in the 1980s from a middle class growing in wealth and power to a middle class losing wealth and power is attributable to the social and political structure we have collectively chosen. These structures can change. It is not easy, it is not fast, but when it does happen it can signal a significant shift whose outcome is often difficult to predict.
There was already a general consensus that by 2019 we had pushed our planet to an ecological and financial limit. The stock market was at record highs by traditional metrics (price to earnings) and global warming was galloping ahead at breakneck speeds. The scientific consensus remains that we were and remain on track for global warming that will bring modern civilization to a halt. There are technical solutions available to this problem, but what we were lacking was the political will (and structure) to execute and scale up these solutions. The ecological crisis was in reality a consumption crisis.
Within the metrics of the old economy based on oil and cheap products from developing countries, we were over-consuming and creating excess greenhouse gases (not to mention garbage and resource depletion). In terms of solving this problem of environmental degradation, there are basically two school of thoughts. The first one argues that we should aim for degrowth and live more modestly. This is rooted in a certain belief that the we must live in harmony with the natural world and that, at the end of the day, the planet would be better off without these pesky humans. The second school of thought can be summarized as technological salvation. That is, we can innovate our way to a world where we live within the limits of the biosphere. I am firmly in the second camp.
I believe that there is an economy that allows all people to enjoy a high quality of life, the ability to travel and eat a rich diet, but that is also within the limits of our planet (and other planets too ;-). I also believe that this approach to the environmental crisis is much more palatable to the general public. If you try to tell everyone they need to sacrifice their quality of life for the planet you are unlikely to get widespread support (it has been tried in the past). To get to this world of ecological harmony between human society and the biosphere, we need to combine innovation with finance and politics to drive our civilization forward. This is no easy task. To achieve such a transformation it is critical to understand the foundations of our civilization. I cannot possibly achieve such an explanation in a blog post, but I hope to point out a few key facts derived from others.
Ray Dalio, the founder of the world’s largest hedge fund, has explained that there really four core drivers (video) of the economy and society. Solving these four items or improving them will be the bedrock of any solution we come up with. In order of importance they are :
- Inventiveness and creativity (which drives productivity and is fairly stable)
- Short term debt cycle (crash every 9 years or so)
- Long term debt cycle (crash/restructuring every 75 years or so)
- Politics (internal (domestic), external (international), how we deal with each other)
He goes on to explain that there are four key ways to deleverage (reduce the amount of debt as a function of assets) is,
- Print Money (central bank)
- Write-Off debts (various people can write off debt, but that hits their balance sheets and has knock on effects)
- Redistribution of wealth (from rich to poor)
- Austerity (has lots of negative side effects)
Of the first four factors in our economy, creativity is by far the most important. Technology – whether it be in the form of machines, business processes, or software is the core driver of human wealth. As people have said, “if we don’t make stuff, there is no stuff” and if we do not make stuff more efficiently than before we are no wealthier than before. Ray Dalio published a review of the last 500 years of GDP, and when you look at it you can barely see the crises that happened throughout the centuries.
The point is that we are living through an economic debt crisis right now, not a creativity problem. Technological innovation and the restructuring of the economy will allow us to change the system for the better and start on a new trajectory that is onwards and upwards.
If we accept that the main solution to our problems is technological innovation, then we need to focus our attention on deploying the technology that will help us continue our growth and improve quality of life. I firmly believe that the path forward is through green, carbon free (or low carbon) technology. We already have a lot of the technology such as electric cars, clean energy, biodegradable materials, etc. The main challenge that remains is mostly political.
We need politics to restructure and invest so that we can deploy green technology on a massive scale. This deployment is akin to the war efforts of WW1 & 2. The Green New Deal is very much in this vein. De-growth is not a solution. De-growth would condemn millions if not billions to a lower quality of life, less education and a return to the dark ages. Growth through green tech is our only path forward, but the obstacles remain political – not technological. To overcome the political barriers there is going to be some pain. The question that remains is who will take on the burden of this transition?
Since the 1980s, inequality has increased while social mobility has decreased. We are now at a point where many millennials and working class families no longer see a path to the “American Dream” of a nice house, cars and a healthy family with a bright future. The rise of inequality is well documented and if you agree with Thomas Picketty’s work (which I do), then we can agree that this growing inequality is not a random event, but it is rather inexorably linked to the capitalist social order that we have chosen. In fact, the inequality is partially linked to these short term and long term debt cycles that allow the wealthy to leverage their money to grow their investments faster than the actual income of people (which is driven by productivity to a certain extent). The debt cycles themselves are based on a deeper social structure that is well outlined in Picketty’s latest book, Capital et Idéologie.
Turning back to the current crisis. I will venture to say that we risk seeing a serious re-evaluation of the things we buy, invest in and do with our time. Much of this will be driven by large factors such as access to capital and debt, some of it will be linked to social changes such as social distancing and some of it will be driven by politics. As an example, China was already slowing last year before COVID took over the scene. With their society past its demographic peak it was somewhat understandable that we had (temporarily) passed a production peak. Due to China’s size this will inevitably spill over into other countries and economies. The COVID cirisis will on exacerbate this trend. The other major factor that COVID will have is the debt challenge. As an example, if commercial real estate is much less in demand, we will see a corresponding decrease in its value. This impacts mortgages, leverage and the health of both real estate holders and their banks. The consequences are hard to predict.
To end on a positive note, I do see an opportunity to use the COVID crisis as a global event that unites us in a common cause. Most nations have a crisis or a war as a central rallying point within their collective imagination. The French have the revolution, the British have the second world war and the Battle of Britain, the Americans have Pearl Harbour, the Russians have Stalingrad, and the Chinese have their own revolution and fight with the Japanese. Until now, there has not been a single global event to unites everyone around the world. If we can place COVID in the collective imagination as a global conflict that we fought and beat together, we may able to leverage this event to work on global challenges such as climate change and our ecological transition. As discussed above, this will take not just speeches, but a true changing of our politics and politicians as well as a financial structure that actually accounts for the degradation of the environment and drives capital to a low carbon, high productivity economy. I remain optimistic that we can make this transition, but it will only happen if we vote and fight for the right types of leaders and institutions.Published on May 17, 2020
On COVID-19, Crisis, and Basic Income
When the Coronavirus broke out last year in China, it seemed so far away. My wife and I had plans to move to Shanghai in April for two months and I would work from our offices there. We optimistically hoped that China would get the disease under control in January and February and it would all be back to normal in April. Today, in China, business and life are returning to normal and there is a good chance that on April 1st, 2020 it will be business as usual with the streets of Shanghai filled with people moving at a frenetic high and the delicious aromas of street food in the air.
While China is getting back up and running, the rest of the world is in lock-down and chaos. This turn of events is both surprising and highly predictable. It is surprising and disappointing that despite warnings we did not prepare better. The way I look at it, “Western Society” had 100 years to prepare for this Pandemic. Just over 100 years ago, the Spanish flu swept through the world in 1918-1920 and killed millions and taught us valuable lessons. Since then we have developed reams of people trained in advanced risk planning, risk assessment, economists, epidemiologists, and a variety of other professions. We built international organizations such as the WHO. We had numerous recent warnings and practice sessions for a pandemic with SARS, MERS and EBOLA. Despite all this knowledge and experience, western governments have failed miserably in their job to protect their people and their economies. The difference in the actions of China and other countries is often attributed their centralized government with strong powers and a population that is used to following orders. This line of argument was recently highlighted in the NY Times and other publications. While there is an element of truth, it is a gross oversimplification and it is an abdication of our responsibility to maintain organizations, systems and plans for a potential pandemic. If there is one conclusion I can draw from the COVID chaos so far, it is that knowledge is not enough. Governments must actively plan, practice and coordinate their various institutions and governments to ensure they can act swiftly when a new virus emerges. I would suspect that most Western countries felt they were prepared for a pandemic, but our overconfidence has led us down the path we are now on.
While the ineptitude of the west is unpleasant, it is even more remarkable that we are surprised by this crisis. Frankly, I am frustrated in my own failure to see this coming and to sell off my stock portfolio! In our globalized and connected world it should have been clear that a virus that infected tens of thousands of people in China would eventually seep out of the country and contaminate the world. We knew that the virus was fairly contagious, certainly more so than SARS, and yet we kept plodding along as if China was hermetically sealed. Some countries limited flights to China, but we all know that it only takes one person to contaminate a very, very large population. There are certainly mountains of academic papers on humanity’s collective failure to see large events coming when they are perfectly clear in hindsight. Sure, hindsight might be 20/20, but with our experts and highly educated populations, why were more people not ringing massive alarm bells in January 2020? Anyways, moving along…
Perception of the Economy & Money
There will certainly be some positive outcomes from this crisis. First and foremost, people are starting to understand how the economy is in fact just a bunch of people transferring money to each other for services. One person’s expenses is another person’s income. Wow! Holy Moly! Who knew?
If we shut down one part of the economy the rest comes to a really abrupt halt, all the way down the line. It’s almost as if we are on a moving train with interconnected parts! One surprise, to some at least, is how tightly wound the economy is. A month without revenue – for people or businesses – is often more than they can handle. There is very little buffer in our society which still has a majority of people living paycheck to paycheck and many businesses in a similar situation. Hopefully this crisis will teach us the importance of planning for the future, helping the less fortunate and building businesses, institutions, people and family that can withstand longer periods of rationing. Beyond preparation and coordination, I am optimistic that this crisis will change our perception of money and what the government can do when it wants to.
To try and prevent or mitigate the current train crash, certain governments, such as Canada and the United States, are implementing a form of basic income for those hit by this crisis. Starting in April Canada will offer $2,000 per month to all residents who lost their job or were affected by the crisis. The Canadian government, after a successful petition by UBI Works (with which I am involved), consolidated a variety of programs into a central program that will start April 6th, and begin distributing $2,000 checks by April 16th. This basic income will be critical to stabilizing the economy and keeping people going. While $2,000 is not enough to live on for some, it is a good start. This relatively unconditional monetary issuance will set a new standard for what is possible and I am optimistic that it will break our traditional perception of what government can do. The Globe and Mail outlines how the program is in fact a significant departure from traditional employment insurance programs. Perhaps this emergency program will be the breach in the dam of complex government programs.
I have been active in the basic income movement for nearly seven years and in that time I have seen a variety of advocacy approaches. My take has always been that basic income is much more revolutionary than people realize. It is not simply a transfer of money, it is a transfer of power. By issuing a basic income to all citizens, you are reducing the influence of the rich and eroding their money and power. The consequence is a more even playing field where a larger swath of society have a fair shot in life. However, because basic income takes something away from powerful people it was always going to be hard to implement. My thinking back then and today is that the only way to institute a basic income was during a period of economic crisis. During a time of social and economic upheaval, government and the people could make this radical change without giving the opposition the time to organize a fight. Naomi Klein has written a lot about disaster capitalism where governments privatize industry during times of upheaval. I do think that disaster politics can go in the other direction to, progressive ideas can become mainstream when a crisis takes place. Milton Friedman wrote, “Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.” The key is to take the temporary and conditional cash transfer Trudeau has created and turn it into an actual permanent and universal basic income. The $2,000 transfer is a key step towards an actual universal and unconditional transfer of wealth to all members of society.
Now that the program is in place UBI Works is pushing for this basic income to become universal and permanent. A real basic income would allow the economy and society to be far better prepared for the next crisis. A basic income would create the buffer that society needs in a time of crisis. It would set a foundation under the feet of everyone and allow us to withstand the future storms that are bound to hit us.Published on March 30, 2020
On having a child
It is tremendously easy to have a baby. Of course, the hard part is to raise the child and be there for them throughout their life – regardless of the child’s personality, capacity’s and fortune. This past August, I had my first child, Samuel, who has been a true blessing. As I write this, he is trying to learn to crawl on his nearby play-mat.
As with other life events such as love, death of a close family member, bankruptcy, success or health issues – is hard to understand what something means without experiencing it first hand. Unsurprisingly, it is hard to convey what having a child and more importantly, having a human depend entirely on you, feels like until you actually hold one in your hands and stare into the depths of their eyes.
At my age of 36 many friends now have children and I have had the opportunity to spend time with older friends who already have grown or semi-grown children. They all explained the various benefits and challenges of raising a child and in all honesty this helped prepare for my own child. However, when my friends had children over the past few years, I would offer my congratulations and a gift, but the congratulations was not nearly as wholehearted as it is today. When I received congratulations from family and friends upon the news of the birth, I could hear a much higher level of enthusiasm in their voice. Once you have a child, you understand the true blessing that it is and you feel a much deeper sense of joy when someone else has their own child.
I have always felt that there are no shortcuts in life and we cannot reinvent the wheel. To life a full, happy life you need certain key ingredients; a meaningful purpose, a strong partner and ideally, children to take care of. Only through these things can you really experience the full spectrum of the human condition. Of course, some people cannot or choose not to have children and this is not meant as a criticism of their choice. Yet, without reproduction our species would disappear and without child rearing, our children would not survive. Like music, food, friendship, love and hate – there is undoubtedly an innate powerful desire to have and raise children hard coded into the depths of our genetic code.
My wife and I have been blessed with a healthy and easy baby. He sleeps well, eats well and barely cries. We are also in the most fortunate of situations with the presence of many family members who are more than eager to babysit and help. Colleagues and friends who do not have such a strong support system or who have difficult babies face a much, much greater challenge than us. It is therefore absolutely critical that our society continues to support families and especially those with more difficult situations. I am very proud that Québec offers subsidized daycare services for only 10$ a day as well as one year maternity leave, 5 weeks fatherly leave, and our Canadian government offers the world’s most generous child support program – the Canada Child Benefit Program, which offers up to $7,500 dollars per year per child based on your income. These programs make a world of difference and are critical to levelling the playing field for all children; giving them a fairer shot at success. Having a child may be easy, but raising a productive member of society is a huge challenge and this support system is critical to our society’s future.
Children are their own people. While they may look up to their parents until their teenage years, they are eventually on this planet to do their own thing. Too many parents project their own values, goals, and failed ambitions on their children. My modest hope is to empower our child to pursue success and happiness in this challenging world. There are no shortage of parenting articles or books, but my approach is to first say thank you to my wife, who inevitably does more than me, and then to offer a steady hand while our son faces the exciting milestones of life. I look forward to the journey ahead and I hope to encourage others to embark on the same rewarding adventure.Published on January 6, 2020