Toxic Efficiency
By Miguel Abuhab

All of us learned how to improve the companies for which we work, at school, and in engineering and management faculties, or even in MBA courses, whether by reducing costs, or by improving processes. Companies and people in general have been trained and educated to seek the best.

To better illustrate our reasons, it is important to note the diagram of conflict which normally exists in a company:



The objective of a company is to increase the return on investment. In order to do this, on the one hand, it is necessary to increase sales, which implies maintaining inventory, but on the other hand to increase the return on investment it is necessary to reduce the investment, or in other words, reduce inventory. This is a conflict.

If the company has its inventory managed by the sales and marketing staff, it will rise to unbearable levels placing at risk the main objective, which is return on investment. On the other hand, if the finance department were left in charge of inventory, it would fall to an undesirable level too, with the result that the company would lose sales, and the main objective, which is Return on Investment, would also be placed at risk.

Each of the departments in the company will seek their local optimum, independently of what is best for the company. The global optimum for the company will only be achieved through the determination of the president proposing a solution of compromise between the conflicting objectives.

The president, who is the highest authority, will define the criteria, adopting compromise solutions between the two conflicting interests within the organization. The president will say that inventory should be kept at a low level, whilst requiring that the same level of customer services is maintained. For the most expensive items, just one part should be kept in stock, and items that are hardly used will not be kept in stock, but will be ordered for each sale made. Or, to put it another way, inventory cannot be maintained at any cost.

Let us now analyze the environmental system.

With the invention of the internal combustion engine and energy generation systems, the Industrial Revolution happened, offering industrial development, generation of jobs, economic development and, in the end, the Well-Being of Humanity, which is the higher objective. Unfortunately, to achieve this higher objective we had the undesirable side effect of environmental pollution.

Note that before the Industrial Revolution, the environment was in balance, but man altered this balance in seeking industrial development, aiming for his local optimum.

Whenever we have the environment in balance and we define a space within it where we seek the local optimum, we will be introducing undesirable effects outside it. The local optimum is like air conditioning: it cools on one side, but heats up on the other.

If we use a chemical process for cleaning or finishing, without doubt we will be benefiting the company, but we will be generating environmental pollution as an undesirable side effect. If we use internal combustion engines to generate energy and to power machines and vehicles, of course we will gain the benefits of the machines and vehicles, but we will be generating environmental pollution as an undesirable side effect.

At the beginning of the Industrial Development process, companies polluted the environment without noticing the undesirable effects they were causing, as at this stage, there were few polluting agents. However, with the passing of the decades, there are now millions of polluting agents which have visibly damaged the environment.

If we compare this with the process of the companies managing their inventory levels, it would be like having the sales manager take care of purchasing and inventory. There would be no limits. This is what happened with Industrial Development: in seeking the Local Optimum the undesirable effect of environmental pollution was not perceived.

Decades later, countries saw that there was a down side:



It was seen that for the Well-Being of Humanity, which is the main objective, Maintaining the Environmental Balance is also necessary, and for this it is necessary to Clean the Environment.

The world saw that it was in great danger. We could no longer think just about the local optimum, but we had to think of the global optimum. We had to think of a way to resolve the conflict.

Whenever there is a conflict, there is a point after which the main objective is placed at risk, in this case, the Well-Being of Humanity. A compromise solution has to be found. The world saw that the global optimum is not the sum of the local optimums.

The countries concerned with maintaining the environmental balance created various strategies, laws, and ISO14000. Nowadays, under ISO14000, if a company produces, for example, automobile batteries, it has to collect the used batteries for recycling, as these cannot be discharged into the environment. Agenda 21 was set up, and the Kyoto protocol, which proposed the controlling of the levels of carbon monoxide emission of each country, with debits and credits which, could be traded as a way of avoiding uncontrolled pollution.

The phase of Industrial Development brought great Economic Development to the world. It created jobs and the Well-Being of Humanity. People constantly received new offers of work and left one job for a new opportunity earning more. The recently graduated already had their job guaranteed even before graduating. The wheel turned at full speed in the direction of economic growth, offering the Well-Being of Humanity.

Although the world saw the problem of environmental pollution much later, this has finally been addressed and perhaps we shall see, at a very high cost to the world, the reversal of this process which was out of control.

Today the phase of Industrial Development is over, and we have passed on to the phase of Competitiveness. Now Industrial Development is not enough; now we have to be competitive.

Let us analyze the diagram below:



For there to be economic development, there has to be competitiveness, and for there to be competitiveness, there has to be automation and job losses. Companies throughout the world seeking economic development have aimed to be competitive, have automated and unfortunately cut jobs.

Today we hear of so many jobs being lost because of competitiveness. Thousands of jobs in the spinning and weaving firms, in the vehicle assembly lines, in agriculture and in so many other activities have simply been eliminated. However, this has not just happened in Brazil, it has happened in all the so-called "developing" countries.

We always believed that the way out of the problems for the developing countries would be through competitiveness; and we all know that the companies became more competitive; today they produce double or triple of what they used to produce, with a half or a third of the people. But if we analyze the indicators of these "developing" countries we see that most of them show a worsening of the quality of life.

If we are in a hole, the first thing we have to do is stop digging. We have to understand that we are in a hole. But now the cost of a robot is 20% of what it was some years back, which means that now we are digging our hole more quickly.

We have to see that pure and simple competitiveness is not the way out of the problems of the countries and of the world.

Let us make a holistic analysis of the problem: some countries, in the name of competitiveness, have automated their processes and no longer import the products of others, obviously aiming for their local optimum. These developing countries, with their companies fighting for survival, also end up aiming for competitiveness, automating and unfortunately cutting jobs. With each cycle of this process we see people looking for work at lower wages, until they reach the point of just surviving and there is no work. The wheel which turned at full speed in the direction of economic growth, affording the Well-Being of Humanity, has now turned in the other direction.

Let us, for example, analyze the automation of agriculture. The rich countries export their equipment to automate agriculture, an example of which would be coffee. The farmers, in order to survive, end up planting cocaine, which is then sent to the rich countries in the form of drugs, and they in turn spend more in fighting the drugs than they earned selling their equipment for automating agriculture.

Unfortunately, the world has not realized that the phase of Industrial Development and pollution is over. Now we are in the phase of competitiveness and uncontrolled automation, generating unemployment. We can include in this globalization and mega-mergers.

We have to understand that the limit of automation is that it puts at risk the lower level jobs in the developing countries. The world cannot manufacture equipment, for example sugarcane harvesters, even for use in the developed countries, while there are people in the world who, as a last alternative, make an honest living cutting sugarcane for the sugar factories.

Imagine the possibility of the automobile assembly factories reaching the point of replacing all their workers by robots. Doing this they would be dispensing with the need for thousands of workers and could offer their automobiles at very low prices, say five hundred Dollars.

More than likely there would be no consumers to buy the automobiles at this price, as robots do not consume the products they manufacture.

Today companies automate and fire their employees thinking that they will sell their products to the employees of the other companies.

This does not take into consideration the social aspects, but rather the profit aspect. In the long term, we should be creating new consumers or new jobs.

The fact is that each job lost in a developed country is one consumer eliminated from humanity.

According to data from the World Bank, 1.2 billion people live on less than one Dollar a day. Remember, this is the population that still manages to "live" on one Dollar a day, as those who have already died are not included in this statistic.

We all have to agree and see that uncontrolled competitiveness kills more than pollution. This is what I call the "Competitiveness Syndrome". Unemployment generates hunger and the people die of starvation.

Could it be that instead of automating the planting and harvesting of coffee, we should not have more coffee farmers and less cocaine planters?

Could it be that instead of automating the cotton process, spinning and weaving, we should not have more employment and less malnutrition in the developing countries?

Could it be that instead of automating the carpet making process in the Middle East, we should not have more employment in handicrafts and less radicalism?

Could it be that instead of automating so many processes in the world, we should not have more people dedicating themselves to productive processes and less people dedicating themselves to terrorism?

Certainly, the lack of a basic activity for people on a low income makes them think of new ways to live, independently of whether this is acceptable to society as something fair and just, or not. Drugs, prostitution, violence and terrorism are means of escape for those who cannot find a dignified way of life.

So what now? What does the future hold? Now it is the sugarcane producers who will cut thousands of jobs. What is going to happen to the person who, as the last resort to sustain his family, decided to cut sugarcane? Will he have a new job, or will we have more violence?

The way we are conducting the economy may be the local optimum for a company, and for the country, but it is not at all reasonable for humanity.

This process is like the pollution of a river. Each thinks that his waste will not pollute the river, but when thousands of people come to throw their waste in the river, we see uncontrollable and devastating pollution. We all understand what kills, that we should do something, but no company in isolation will begin this process if its competitors do not do the same.

When we have a complex problem, we do not need to resolve everything to improve the whole. We need to identify and resolve a restricted part of the problem to improve the whole.

In the case of humanity we have seen that the pollution generated by man seeking the local optimum does not contribute to the global optimum. We have to adopt drastic solutions to contain the destruction of the environment and we still do not have the process under control.

Unfortunately, the process of competitiveness goes on without any limits, putting at risk the main objective, which is the well-being of humanity.

The example of what was done with environmental pollution, where the Kyoto protocol was set up to compensate credits and debits of carbon monoxide pollution, should be used to set up indicators to identify the companies which generate consumers and those which generate unemployment.

If companies in the developed countries require ISO9000 for certification of the quality process, and ISO14000 for protection of the environment to import products, why do we not create an ISO19000 for protection against the "Competitiveness Syndrome"?

What we have done up to now is done, but now we have a greater awareness of our role in humanity, we have to take this awareness to the countries which determine the destiny of the world, so that in the future they become richer. It does not matter! What matters is that the poor are less poor!

In the end, technology is necessary, and often, it is more than sufficient.

October, 2001

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