Summer Rerun: Stupidity – Communist-Style and Capitalist-Style

There’s an old story about a Soviet-era factory that made bathtubs. Plant management was measured on the total tonnage of output produced–and valves & faucets don’t add much to the weight, certainly not compared with the difficulty of manufacturing them. So the factory simply made and shipped thousands of bathtubs, without valves or faucets.

The above story may be apocryphal, but the writer “Viktor Suvorov” tells an even worse one, based on his personal experience. At the time, he was working on a communal farm in Russia:

The General Secretary of the Party set a task: there must be a sharp rise in agricultural output. So the whole country reflected on how best to achieve this magnificent aim.

The fertilizer plant serving the communes in Suvorov’s area resolved to do its part:

A vast meeting, thousands strong, complete with brass bands, speeches, placards, and banners, was urgently called at the local Chemical Combine. To a man, they shouted slogans, applauded, chanted patriotic songs. After that meeting, a competitive economy drive was launched at the Chemical Combine to harvest raw materials and energy resources.

The drive lasted all winter, and in the spring, on Lenin’s birthday, all the workers came in and worked without pay, making extra fertilizer from the materials that had been saved…several thousand tons of liquid nitrogen fertilizer, which they patriotically decided to hand over, free of charge, to the Region’s collective farms.


The local communes were told that all fertilizer must be picked up in 24 hours–the factory’s product tanks were full, and if the bonus fertilizer was not removed, production would come to a standstill. Suvorov was the truck driver for his collective, and it was his task to go to the plant and pick up the farm’s allocation. Problem: the truck could only carry 1.5 tons at a time, and a round-trip to the plant would take about 10 hours. The commune’s allocation was 150 tons. There was also a shortage of fuel for the truck. And Suvorov knew that if he didn’t complete his mission, the director of the commune would be replaced. While the man was not to everybody’s liking, his expected replacement was much worse.

What to do?

When Suvorov arrived at the plant with his truck, he saw that the other communal farms had faced the same problem, and had hit on a solution.

There was a long queue of trucks of different makes, dimensions, and colours standing outside the Chemical Combine. But the queue was moving fast. I soon discovered that lorries, which had only a moment before been loaded, were already returning and taking up new places in the queue. Every one of these lorries ostensibly needed many hours to deliver its valuable load to its destination and then to return. But they rejoined the queue in a matter of minutes. Then came my turn. My tanks were rapidly filled with the foul-smelling liquid, and the man in charge marked down on his list that my native kolkhoz had just received the first one and a half tons of fertilizer. I drove my lorry out through the Combine’s gates and followed the group of lorries which had loaded up before mine. All of them, as if at a word of command, turned off the road and descended a steep slope toward the river Dneiper. I did the same. In no time at all, they had emptied their tanks. I did the same. Over the smotth surface of the great river, the cradle of Russian civiliztion, slowly spread a huge poisonous, yellow, stinking stain.

The great fertilizer production drive was undoubtedly marked down in government records as a tremendous success.

Don’t be too smug, though, fellow capitalists. My next example of institutional stupidity comes from the American private sector.

Kevin Meyer, who blogs at Evolving Excellence, was paying bills and noticed that when he put the return part of a certain credit card statement into the envelope, the address sat too high to be seen through the window. After several months of folding over an eighth of an inch at the bottom of the statement so the address showed correctly, he called customer service. The agent had obviously heard of this issue before, because she immediately told him what the problem was: The margin at the bottom of the statement was an eighth to a quarter inch too wide, thereby pushing the address upwards.

Kevin is focused on process improvement in manufacturing and other aspects of business, using “lean” methods such as those developed as part of the Toyota Production System, so he was curious enough to pursue the matter further. Here’s what was going on:

An unknown glitch in the bill-printing program added a blank line of text at the bottom of the statement, thereby creating a wider margin. The I/T people at the bill-printing location didn’t think the problem was important enough to prioritize a fix very highly, even though the effort to do the fix was trivial.

Payments were not processed by the bill-printing group, but by a separate, outsourced organization. This group found itself receiving hundreds of thousands of payments folded in such a way that the account number was now not visible to the automatic scanning equipment. Kevin explains how this problem was solved:

They bought some monster pieces of equipment to straighten and flatten bills at high speed, then set up a separate bank of automatic readers with the camera offset from normal. 

This outsourced operation processes bills for many companies, so in effect they had to create, procure equipment, and set up a separate processing line. So much for flexibility. And I’m betting the company did a great job of adding up the extra cost and passing it on to the credit card company… who then feels the need to raise my assorted fees or find something more to outsource overseas.

So, because one group in a company was unwilling to make a programming change that would have required maybe ten minutes, people elsewhere in the business process were forced to make additional, and basically useless, capital investment, and to change their own processing flow in a way that reduced flexibility and efficiency. Most likely, the people running the payment processing center either: (1) tried to get the printing software changed, and were unable to get their request sufficiently prioritized, or (2) knew from previous experience that the company’s IT group was unlikely to respond to their request, and didn’t even bother to make it, or (3) knew that their business was measured and paid in such a way that they had no incentive to improve efficiency or to avoid reducing eficiency.

This is an especially vivid example, but things like this happen with dismaying frequency in American companies. (And a disproportionate number of them seem to involve the Information Technology function.)

Of course, this example isn’t really as bad as the Soviet example. In a market economy, the damage done by inefficiency and incompetence in a particular corporation is automatically limited by the financial consequences to that corporation, rather that being allowed to spread uncontrollably throughout the entire economy as tends to happen in a socialist system. It’s still pretty bad, though. And both cases, though, demonstrate the way in which institutions can exhibit strange and counterproductive behavior if incentives and divisions of authority are not carefully thought out and intelligently managed.

(“Viktor Suvorov” is the pseudonym for Vladimir Bogdanovich Rezun. The fertilizer story is from his book “The Liberators,” which is primarily about his experiences in the Soviet Army–which he joined largely because he didn’t see much future as a Soviet-style communal farmer.)

16 thoughts on “Summer Rerun: Stupidity – Communist-Style and Capitalist-Style”

  1. It’s all well and good to chuckle at Commie vs. Capitalist inefficiencies until you read about how Mao decided it made sense to order seeds to be placed closer together, because obviously planting 50% more seeds will result in 50% more yield, but of course Mao knew nothing about farming so the crops didn’t have enough space to grow properly so there wasn’t enough food, but the central government insisted all regions turn in their expected food allotment to the central authorities, AND people had been ordered to melt down their kitchen equipment to produce steel to industrialize the economy, but it wasn’t at all appropriate material, so it did nothing but produce worthless junk, but now people couldn’t cook their own food and had to go to the local dining halls, which had no food, because their BS yield numbers and quotas meant they should have still had plenty left over, so 50-60 million people starved to death.

    Ha ha ha! Oh those crazy commies!

  2. Brian, the practice of close planting was due to Lysenko. IIRC, the justification was that experiments showed that plants of the same species would exhibit “species solidarity” resulting in improved growth when closely planted. Think of it as Marxist biology with species standing in for class.

  3. I’m sure the IT section of the American company had some employees who had been involved in the design of the Electronic Medical Record.

    It certainly seems the product of one of these enterprises. Especially the feature that requires a diagnosis be entered before any data can be recorded.

    Once the real diagnosis is entered, the usual function of medical intervention, the original diagnosis, which may have nothing to do with the final, cannot be changed or deleted.

    It is pretty reliably estimated that the EMR adds about 25% to the time to process each patient interaction. Older doctors are retiring early to avoid using it.

    The UCLA and Cedars-Sinai hospitals, which have overlapping medical staffs, do not have compatible EMRs. A doctor at UCLA who may be a UCLA faculty member, cannot access the Cedars EMR system even for a patient previously hospitalized there. And vice versa.

    The widespread use of the EMR was mandated, with penalties for failure to adopt, by Obamacare.

  4. “His war on sparrows was worse.”

    I knew someone who was a little girl in China during that time who told stories about the anti-sparrow campaign, where all the people had to bang pots and pans to prevent them from landing so they would fall out of the sky dead. I didn’t believe it had really happened, thought it was hyperbole on her part. Commie countries are crazier than we in the West can imagine. It’s not really analogous to office space inefficiencies.

  5. (1)

    Soviet 5 Year Plans and Increased Production. How government production really works.
    === ===
    [edited] Managers and employees of glass plants in the former Soviet Union followed master-plan production guidelines.

    They were rewarded according to the tons of sheet glass produced. Not surprisingly, most plants produced sheet glass so thick that one could hardly see through it. And, this glass did not fit or fix prior applications such as broken windows.

    The rules were changed to reward the total area of glass produced. So, they produced glass so thin that it broke easily.
    === ===

    (2) I know about software development. I suggest that the reason the bill-printing software was not fixed is that they were afraid. Such software has been developed over 20 years to meet many special situations. Think of the accumulation of 100 quick fixes, undocumented, starting with a legacy system developed on now-obsolete computers.

    Eventually, no one understands all the spaghetti, and they don’t want to touch it. They can’t be sure that they won’t break their system for some of their other 400 clients, even if the new “fix” would seem to take only 10 minutes.

    The extra line at the bottom for some of their customers was probably a deep mystery to them, the result of some quick fix lost in time.

    === ===
    [edited] The former Labor government responded to complaints about waiting times. It set a target for NHS hospitals to treat patients within four hours of entering the hospital emergency department.

    The Daily Mail reported the results in 2008. Hospital administrators let seriously ill people wait in ambulances for hours outside the hospital so that they weren’t technically counted as waiting. As a further complication, the ambulances weren’t available to answer new emergency calls.

  6. The Toyota Production System solution for communication across silos in large corporations would still work for solving problems amongst outsourced vendors like the credit card bill example. That would be the position of Chief Engineer or Deployment Leader.

    Hierarchies and suzerainties are inevitably going to form. The Chief Engineers have responsibility to unite them but no real power to do it. They get separate units to follow their directions by formulating and presenting a vision powerful and persuasive enough for the groups to reach out of their local comfort zones and join the program. Sounds kind of weird, but it works.

  7. Ugh. For a time, I worked for an enterprise taking hotel reservations, using a software program which must have been developed back in the mists of time … which was so unwieldy, so complicated, so full of odd work-arounds that it took a two week course (at the enterprise expense, of course) to prepare people to use it at the basic level and more than six months to get operators adept with it. They could have saved themselves a bundle with a more advanced program, but with so much invested in the old … better to pay two weeks wages for the training and have workers bail out of exasperation and burn-out after a few months than take the trouble to update.

  8. The FBI spent ten years and several hundred million on a new enterprise software system that was supposed to let agents share files and exchange information.

    A couple of years ago they abandoned the program and began again That was ten years ago and they do not have a workable system yet.

    When I was in the Masters program at Dartmouth in 1994-95, an ER doc in the program had developed software for scanning dictations and extracting billable items from it. Her program was being used by other ER docs in Maine, where she lived, to generate bills and print them in various formats required by insurance companies.

    That would have been a base for a usable EMR if it could be scaled up. I was an enthusiast for years and was a member of the American Medical Informatice Association and went to meetings for years. The present EMR system resemble nothing that we expected to see by now.

    I even wrote a grant proposal based on the use of an EMR when I got back to California.

    It probably would have worked if we had gotten funding.

  9. Shannon Love wrote an article on this site a few years ago which discussed the ubiquity of greed in human cultures, and, specifically, that the criticism of free market activity, that it rewards greed, is falsely selective, in that greed is present, and manifests itself continuously, in public systems and activities as well as private.

    This discussion is replete with anecdotes about various forms of foolishness and inefficiency, some trivial, some seriously damaging.

    Step back for a moment, and what is clear is that human nature, both it’s good elements and it’s bad, operates across all the ideological and cultural lines that human society produces.

    The genius of a free market system, operated by individuals who are free to make their own choices for their own reasons, is that it limits the damage that any one person or idea can do, by allowing those affected by the situation to make a different choice if the poorly designed or malicious one shows itself to be a bad idea.

    The fundamental reason that the Mao’s and their ilk are so attached to big centrally mandated programs and solutions, and so outraged by any dissenting opinions, is that they must be right, since the gnostic knowledge imparted by their ideology guarantees it, and they are therefore justified in destroying any opposition.

    The moral basis for free market activities in a relatively free society is that this ability to literally kill one’s opposition over a disagreement is removed, and differences must be debated, tested, or resolved in a court of law.

    The greatest, and most deadly, con job in our cultural history is the idea that the coercive political power of the state is a benevolent and compassionate factor in our society, but that the actions, and even ideas, of the private individual are dangerous and oppressive, and, while the former must be expanded and enhanced in any and all circumstances, the latter must be rigidly controlled and repressed.

    The old adage states that necessity is the mother of invention, and that may very well be true, but it is the freedom of the individual, and their liberty to make their own independent judgements, that is the mother’s milk that nurtures it.

  10. Veryretired: It isn’t a matter of “gnostic knowledge”. It’s that when the centralized planners get something right (and occasionally they do) it works beautifully. There is a huge emotional high from that. Decentralized processes never reach that level of perfection and never provide that reward.

    Overall, decentralized processes work better – they don’t have massive ghastly failures, and the they adapt better to changing conditions. But they never seem as good as centralized processes when the latter happen to succeed.

    And they never provide that reward.

    Kipling wrote something that seems relevant: “…he had tasted for the first time Responsibility and Success. Those two make an intoxicating drink, and have ruined more men than ever has Whiskey.” That’s ultimately what the centralizers crave. As with many other addictions, only the highs are remembered.

  11. RichR….”when the centralized planners get something right (and occasionally they do) it works beautifully…Overall, decentralized processes work better – they don’t have massive ghastly failures, and the they adapt better to changing conditions.”

    That’s a really important insight. The fact that Big Government can create a network of dams of electricity generation and flood control…or can put a man on the moon…does not imply that Big Government can effectively run, say, the nation’s grocery distribution business…or its health care.

  12. A relevant post and discussion thread at Sarah Hoyt’s blog.

    “Being a conservative — or, like me, simply an anti-communist — in the seventies was fighting a rear-guard action, with the certainty we were going to lose. It was like being one of the warriors at Ragnarok. You fought as hard as you could and you knew you’d lose.

    The assumption was that communism was more efficient. Central, top-down planing just eliminated waste more, which is why we needed it when we were all heading for the world of “make room, make room.” Most anti-communists opposed communism because they thought life under it would be worse for the individual, but agreed that due to its incredible efficiency it would win out.”


  13. “with the certainty we were going to lose”
    It’s very strange to read Witness post-Cold War, since Chambers was 100% sure that the commies were going to win, and the West was doomed.

    One hopes that current fears about the left are equally mistaken, but it is difficult to be so confident. It feels like blind faith to think so.

  14. “One hopes that current fears about the left are equally mistaken”

    The fears will be confirmed but the results may be pretty painful to endure until a correction arrives.

    When Rome fell, the Dark Ages lasted a long time.

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