David Foster

Regulatory Overkill?

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The legislation to protect children from lead in toys and other products, however well-intentioned, is likely to cripple and even destroy hundreds of companies–especially small, home-based companies–whose products are perfectly safe. This from Evolving Excellence, who points out a number of practical problems with the legislation.

Problem #1: certification testing must be done by a lab on a “certified list”. This list isn’t exactly long, and their are hundreds of thousands of products. Guess what is happening to those labs: the waiting list for lab work extends out months and the cost per lab workup has gone from $200 to as much as $6000… per sample.

# Problem #2: testing must be done at the product level, not the component level. So a common component used in multiple types of products must be tested multiple times. What does this mean? Each SKU must be tested separately, even if they are virtually identical. One pair of jeans and a slightly different pair of jeans, both using the exact same raw denim, must be tested separately. See the video below, where a manufacturer of science kits has 40,000 SKU’s… and is looking at a $20 million dollar cost for initial certification testing. This is why many products, and companies, will simply cease to be sold.

These are only the first 2 of the 5 major problems that EE identifies with this legislation. Read the whole thing.

February 10, when this law take effect, is being referred to as national bankruptcy day.

Congresspeople talk endlessly about the need to “save good American manufacturing jobs”–but at the same time, they often pass legislation which is extremely damaging to the manufacturing sector, without bothering to take the trouble to understand what they are actually doing. And when it comes to small manufacturing companies whose employees do not represent substantial voting constituencies and whose managements do not represent a substantial source of campaign funds–there are many in Congress who do not really even care what happens to them.

Here’s an example of a toy which will no longer be available in the U.S. as a consequence of the new regulations. (via Glenn)

Chicago Boyz Discussion on General Motors

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…from 2005.

I posted the question “What would you do if you were running General Motors?” A lively discussion resulted, with over 100 comments…thought it might be worthwhile reposting in view of recent events.

One of the most memorable comments was from Ralf, on another discussion thread:

“What would you do if you were running General Motors?”

I would stop running the company and start just plain running. :)

More on the Auto Bailout

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Newly-elected Congressman Jared Polis (a Democrat!) offers some interesting thoughts on the politics of the automotive industry:

Our United States Congress of lawyers, doctors, diplomats, retired military officers and career politicians — along with their staffs of intelligent young political science majors and MBAs — now finds itself poring over “business plans” submitted this week by Ford, GM and Chrysler. People who have never before in their lives seen — no less implemented — a business plan are now trying to decide if these companies will succeed by means of a “capital infusion” with various imposed preconditions and negotiate what we taxpayers (investors) should be getting for our money. Something is wrong with this picture.

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An Automotive Bailout?

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Here’s an open thread, if anyone feels like discussing this issue.

Drucker on Management Mentalities

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Among liberals, “progressives,” and especially academics, there is great joy at the prospect of an administration dominated by people who had very high SAT scores and who possess advanced degrees.

At the same point in time, we are experiencing a serious credit crisis, brought about to a substantial extent by naive and inadequate mathematical models–mostly developed by people with very high SAT scores and very often with advanced degrees.

About 20 years ago, Peter Drucker wrote a wonderful pseudo-autobiography, “Adventures of a Bystander.” It tells his own story only indirectly, via profiles of people he has known. These range from from his grandmother and his 4th-grade teacher in Austria to Henry Luce (Time-Life) and Alfred Sloan (GM).

In the chapter titled “Ernest Freedberg’s World,” Drucker writes about two old-line merchants. The first of these, called “Uncle Henry” by those who knew him, was the founder and owner of a large and succesful department store. When Drucker met him, he was already in his eighties. Uncle Henry was a businessman who did things by intuition more than by formal analysis, and his own son Irving, a Harvard B-School graduate, was appalled at “the unsystematic and unscientific way the store was being run.”

Drucker remembers his conversations with Uncle Henry. “He would tell stories constantly, always to do with a late consignment of ladies’ hats, or a shipment of mismatched umbrellas, or the notions counter. His stories would drive me up the wall. But gradually I learned to listen, at least with one ear. For surprisingly enough he always leaped to a generalization from the farrago of anecdotes and stocking sizes and color promotions in lieu of markdowns for mismatched umbrellas.”

Reflecting many years later, Drucker observes: “There are lots of people with grasshopper minds who can only go from one specific to another–from stockings to buttons, for instance, or from one experiment to another–and never get to the generalization and the concept. They are to be found among scientists as often as among merchants. But I have learned that the mind of the good merchant, as also of the good artist or good scientist, works the way Uncle Henry’s mind worked. It starts out with the most specific, the most concrete, and then reaches for the generalization.”

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