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#118 Scriptural Specialization & Vladimir Putin
#118 Scriptural Specialization & Vladimir Putin
The Bible tells us to specialize so we can better serve our neighbors. The current Russian leader does not understand this basic principle of economics.
Nike doesn’t make shoes, Apple does not make iPhones, and Ford only assembles cars, they don’t make them. Tesla DOES make their own cars, but I agree with this Wall Street Journal article that encourages them to outsource it.
Digital Disruption
The world’s largest taxi company owns no taxis: Uber.
The largest accommodation provider owns no real estate: Airbnb.
The world’s most valuable retailer has no inventory: Alibaba
The most popular media owner creates no content: Facebook
The world’s largest movie house owns no cinemas: Netflix
The largest software vendors don’t write the apps: Apple & Google
The point: You don’t have to own nor control resources to create value. Vladimir Putin does not understand this basic, 21st-century principle. He’s stuck in the medieval thinking that controlling land and nations makes a country richer. He should have learned via his tragic experience with the Soviet Union that it does not. Trying to control people who desire freedom is really expensive: In manpower and lives.
In a recent WSJ article, titled Putin’s Vertical Empire Will Fall, Andy Kessler points out, You don’t invade countries anymore because after the smoke clears, you have to fix their plumbing and heating and cell service. Instead, you hire them.
Russia should supply to the world the commodities in which it has what David Ricardo called comparative advantage: Oil & gas, maybe coal, steel, and nickel. It’s a simple rule of economics: Do what you do best, and outsource the rest. President Putin wants to control it all. That’s a huge mistake, politically, militarily, morally, and most of all economically.
Outsourcing & Off-shoring
My daughter and her husband met while they were both managers of Cheesecake Factory restaurants. One evening, I asked them “Who do you write your biggest checks to?” There was a meat supplier, a fish supplier, a vegetable supplier, two uniform suppliers. They even outsourced the care of the plants and the floormats. I concluded, “So all you do is prepare food and serve it?” That’s about it. I’m not in the restaurant industry, but I’ve heard that food commodities should represent about 25% of the total check paid by a consumer. That means, they take $25 worth of food and change it into $100 in about 12 minutes. Okay, I know, there are many other expenses involved in the building and labor and other expenses. But the stockholders of the Cheesecake Factory have noticed that they make a gross profit of 400% in 12 minutes. So they tell the Cheesecake managers, “Do more of that. Anything that falls below a 400% gross return, outsource that to someone else.”
Out-sourcing is finding someone else to perform a certain function that you’re not good at. Off-shoring is simply doing it in another country. I’ve pointed out in many of my podcasts that I can’t find a scripture that tells us to discriminate against Canadians, Mexicans, nor Chinese. Now, if they are using the economic gain from the trade, to enslave their own people or threaten the world, as China may be doing, certainly we need to rethink our trade relations with that country. Or, if like Russia, they use the economic benefit from their oil sales to attack a peaceful, democratic neighbor, as they have in Ukraine, we need to rethink our trade patterns.
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By The Christian Economist | Dave Arnott
4.9
7373 ratings
#118 Scriptural Specialization & Vladimir Putin
The Bible tells us to specialize so we can better serve our neighbors. The current Russian leader does not understand this basic principle of economics.
Nike doesn’t make shoes, Apple does not make iPhones, and Ford only assembles cars, they don’t make them. Tesla DOES make their own cars, but I agree with this Wall Street Journal article that encourages them to outsource it.
Digital Disruption
The world’s largest taxi company owns no taxis: Uber.
The largest accommodation provider owns no real estate: Airbnb.
The world’s most valuable retailer has no inventory: Alibaba
The most popular media owner creates no content: Facebook
The world’s largest movie house owns no cinemas: Netflix
The largest software vendors don’t write the apps: Apple & Google
The point: You don’t have to own nor control resources to create value. Vladimir Putin does not understand this basic, 21st-century principle. He’s stuck in the medieval thinking that controlling land and nations makes a country richer. He should have learned via his tragic experience with the Soviet Union that it does not. Trying to control people who desire freedom is really expensive: In manpower and lives.
In a recent WSJ article, titled Putin’s Vertical Empire Will Fall, Andy Kessler points out, You don’t invade countries anymore because after the smoke clears, you have to fix their plumbing and heating and cell service. Instead, you hire them.
Russia should supply to the world the commodities in which it has what David Ricardo called comparative advantage: Oil & gas, maybe coal, steel, and nickel. It’s a simple rule of economics: Do what you do best, and outsource the rest. President Putin wants to control it all. That’s a huge mistake, politically, militarily, morally, and most of all economically.
Outsourcing & Off-shoring
My daughter and her husband met while they were both managers of Cheesecake Factory restaurants. One evening, I asked them “Who do you write your biggest checks to?” There was a meat supplier, a fish supplier, a vegetable supplier, two uniform suppliers. They even outsourced the care of the plants and the floormats. I concluded, “So all you do is prepare food and serve it?” That’s about it. I’m not in the restaurant industry, but I’ve heard that food commodities should represent about 25% of the total check paid by a consumer. That means, they take $25 worth of food and change it into $100 in about 12 minutes. Okay, I know, there are many other expenses involved in the building and labor and other expenses. But the stockholders of the Cheesecake Factory have noticed that they make a gross profit of 400% in 12 minutes. So they tell the Cheesecake managers, “Do more of that. Anything that falls below a 400% gross return, outsource that to someone else.”
Out-sourcing is finding someone else to perform a certain function that you’re not good at. Off-shoring is simply doing it in another country. I’ve pointed out in many of my podcasts that I can’t find a scripture that tells us to discriminate against Canadians, Mexicans, nor Chinese. Now, if they are using the economic gain from the trade, to enslave their own people or threaten the world, as China may be doing, certainly we need to rethink our trade relations with that country. Or, if like Russia, they use the economic benefit from their oil sales to attack a peaceful, democratic neighbor, as they have in Ukraine, we need to rethink our trade patterns.