Redundancy at the Expense of Efficiency

Boeing’s crash in China couldn’t come at a worse time. Were you forwarded this email? [Sign-up to Rude Awakening here.]( [Unsubscribe]( [The Rude Awakening] It’s come to our attention that you might be missing out on extra benefits exclusively for Rude Awakening subscribers. Check out our website where you can find archives, updates, and everything else included in your subscription. You can access it by [clicking here now](. Redundancy at the Expense of Efficiency - Boeing, along with many other companies, stopped doing business in Russia. - Yesterday’s horrific crash in China couldn’t come at a worse time. - If China looks more to Airbus, that will be two large markets gone in quick succession. [Keep Calm and Hold These 3 stocks]( Some investors panic when stocks crash. I don't. I'm relaxed. Calm. Cool. Because I'm collecting monthly checks for life from a select group of stocks. In retirement, you're playing with fire pouring 40 years of savings into a risky, volatile, overpriced stock...especially as interest rates are rising. Instead, [I'm pouring money into quality, stable income stocks paying my bills each month.]( That's why I'm calm when others panic. [See these 3 stocks and collect monthly income for life.]( [Click Here To Learn More]( Sean Ring Editor, Rude Awakening Happy Hump Day! As we’re getting ready to fly 15 long hours to Rome soon, that China Eastern crash yesterday was jarring, to say the least. As Christopher Reeve’s Superman once said, “Statistically speaking, flying still is the safest way to travel.” But Margot Kidder’s clearly shaken Lois Lane seemed unassured. Planes crash occasionally, and they seem to do so more on this side of the world. But it was the way the plane crashed. Caught on a few cameras – what isn’t nowadays? – the plane looked like a missile heading perpendicularly down on a target. Sky News Australia’s senior flight correspondent wouldn’t rule out terrorism, saying the flight path downward indicated it may not have been a systems malfunction. But that won’t quell Chinese authorities, who have yet to reinstate Boeing’s 737 MAX. The MAX wasn’t the plane in the crash, of course, but this older model crashing will surely weigh on the reinstatement. Though this model is older, it’s allegedly easier to fly. That’s causing even more consternation in the Middle Kingdom. Let’s look at how American and European companies are virtue signaling their way into crises. Building Resilience into Antifragility Nassim Nicolas Taleb, perhaps the finance industry’s agony aunt, wrote a few books that ought to be read before entering any career. He calls them[The Incerto](. Here are their titles: - Fooled By Randomness - The Black Swan - The Bed of Procrustes - Antifragile - Skin in the Game Today, I’ll concentrate on Antifragile’s main idea, as I think Western companies are ignoring it to their detriment. Maybe even to their eventual demise… Taleb writes in Antifragile: Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. Yet, in spite of the ubiquity of the phenomenon, there is no word for the exact opposite of fragile. Let us call it antifragile. Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better. Taleb goes on to allege that “antifragility determines the boundary between what is living and organic (or complex), says, the human body, and what is inert, say, a physical object like the stapler on your desk.” We’ve got two eyes, ears, lungs, kidneys, testes (perhaps), boobs (perhaps), legs, and arms. Even two cerebral hemispheres. And we can function just fine with any one of those things. And that leads to redundancy. Brett and Kate McKay over at The Art of Manliness wrote a great article on Taleb’s work titled,[Two Is One and One Is None: How Redundancies Increase Your Antifragility](. From their article: How redundancies increase our antifragility is obvious: if you only have one of something, and it fails, you can be up the creek without a paddle. Members of the military have a maxim that neatly sums up Taleb’s philosophy: “Two is one and one is none.” If you bring one piece of gear on a mission, it’s bound to break, and when it does, you’ll find yourself in a real pinch. Far better to have not only a Plan A and a Plan B, but a Plan A, B, and C. Former [Navy SEAL Richard J. Machowicz calls]( the intentional creation of strategic redundancies “advantage stacking” – “you want to stack so many of the advantages in your favor that, when the order comes, when the opportunity presents itself, you can’t help but win.” “Two is one and one is none” may sound fatalistic, but it’s also realistic; Murphy’s Law is far too often in effect. Or as Taleb puts it, “Redundancy is ambiguous because it seems like a waste if nothing unusual happens. Except that something unusual happens—usually.” Here’s where this relates to Boeing and other Western virtue signalers. When You Rely on Efficiency, You Get Caught Out When I worked as a young trader operations specialist (a clerk, really, who typed trade tickets into our back-office systems), someone always – always – checked my work. And I checked theirs. We never did anything on our own because there were bound to be errors no matter how diligent, competent, and sober we were. Now, expand that upward. All companies need to have redundancy procedures in place to ensure the safety of the firm. I don’t think Western companies have thought this through. Sure, I think solely relying on Russia for their every energy need has put Europe in one hell of a pickle. Conversely, I think completely excluding Russian energy supplies from their mix is suicidal. And we may see this come to pass if the Europeans don’t wake up and cut a deal before next winter. American companies like Boeing have already ceased all business activities in Russia. I’m sure Boeing executives weren’t expecting the crash in Southern China. And yet, here we are. Recommended Link [Donald Trump — a Silicon Valley HERO?]( [Click here for more...]( What if Trump recently did something that could see him become a HERO in Silicon Valley? According to the man dubbed “The Tech Prophet” by Forbes, it’s true. A single Federal Ruling in the final year of Trump’s presidency could be about to unleash a tech revolution worth an estimated $15.1 trillion. In the words of one tech insider – a CEO who works closely with Microsoft, Intel and Google – it “will rewrite the rules of what is possible.” And it could create countless ways for you to grow your wealth. [Get The Full Story Here]( I’m not so fatalistic to think Boeing will run out of countries to sell to. That’s plainly absurd. But those cartographically-challenged Americans currently running the USG need to understand this map: Credit: Google Maps Sure, the Mercator projection makes Russia look enormous. Nevertheless, that’s a whole lot of flying. China is already developing its own aircraft. Now Russia will surely do the same. They won’t be as good as Boeing for a long time. But eventually, they’ll get there. And Boeing will never get back in that market. It’s an entirely new risk American investors need to worry about. Let’s call it “exclusion risk.” It’s the risk American companies you’re invested in can’t expand into huge markets. It puts a ceiling on their growth and limits your opportunities as a business owner. And that’s not all. Boeing recently said[it won’t buy Russian titanium](. (Luckily, Airbus isn’t that stupid.) Russia is by far the world’s largest producer of the all-important metal. Boeing alleges they’ve diversified their platinum sourcing. "We have suspended purchasing titanium from Russia. Our inventory and diversity of titanium sources provide sufficient supply for airplane production,"[Boeing said in an emailed statement](. I flat out don’t believe them. Like I don’t believe Europe will get through next winter without Russian gas turned on to the full. Wrap Up Realpolitik needs to be reinstituted as a policy. This pie-in-the-sky, “nah, it’ll be alright” attitude towards sources of important resources and international revenue must be abandoned. America has done business with dictators far nastier than Vladimir Putin. Sure, he does things his own way for his own country. That’s exactly how America says it does business. If this conflict doesn’t get resolved soon, American companies will be in international peril. I don’t think any of the companies who quickly abandoned Russia will be allowed back in. And that’s a risk American investors must look at when they’re investing in homegrown companies. Building antifragility must come back into vogue. Until tomorrow. All the best, Sean Ring Editor, Rude Awakening [Whitelist Us]( | [Archive]( | [Privacy Policy]( | [Unsubscribe]( Rude Awakening is committed to protecting and respecting your privacy. We do not rent or share your email address. 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