In my morning browsing of business news on the internet, I read an opinion piece in Forbes, "Why Amazon Can't Make A Kindle," by Steve Denning. Denning explains that much of the manufacturing and electronics expertise or infrastructure is no longer available in the United States to make this kind of device; he does not share the complacency of some writers about the outsourcing of manufacturing to Asia or elsewhere. He illustrates by describing the experience of Dell Computers, which gradually outsourced in turn each of several key components of its computers to its Taiwanese manufacturer, ASUSTeK---only to find that ASUSTeK now manufactured entire computers which it then offered directly to Best Buy and other retailers. He explained by saying that each of these outsourcing decisions by Dell was rational: each outsourcing decision increased its revenue. But of course the long-term result was disastrous, and Denning says this is happening throughout our economy. This brought to mind something from mathematics known as the 'greedy algorithm.'
The greedy algorithm is a technique for optimization. Suppose you have a quantity you wish to optimize, say revenue, which depends on many variables (labor costs, raw material costs, etc). The greedy algorithm consists of adjusting all of the variables bit by bit in such a way that the value of the quantity to optimize is increased a little bit each time. But it turns out to be a poor algorithm for optimization, as suggested by its pejorative nickname. To understand why, you're supposed to visualize the optimization problem as trying to climb to the top of the highest mountain in a mountain range. The greedy algorithm says, wherever you are, advance in the uphill direction. But the algorithm fails because you will find the top of the nearest hill but then be stuck there; the true goal might be a mountain some distance away from the hill. More sophisticated algorithms for optimization may include a mechanism for hopping over hills to other potentially higher peaks.
I think a lot of problems in this country boil down to the application of the greedy algorithm. Outsourcing would be one key example. But there are others. One that troubles me is agriculture: in its efforts to increase profits, the food industry has gradually become ever more unhealthy. The animals are confined in small cages or pens, or crowded in concentrated animal feeding operations, and fed unnatural diets and antibiotics; a typical hamburger combines meat from dozens of cows, increasing the chance of a food contamination disaster; the public has become inured to a extremely unhealthy diet of fast food and junk food, made normative through relentless advertising, especially to children. The food industry might be profitable, but the present arrangement is hardly optimal in terms of the health of the environment or the public. And I wonder if the people who made all these decisions truly feel good about what they've accomplished.