AMERICAN ANTITRUST INSTITUTE Symposium on Buyer Power

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AMERICAN ANTITRUST INSTITUTE Symposium on Buyer
Power

• The Disassembly Line
• The Corporation and America
• Barry C. Lynn
• New America Foundation

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PreludeThe Unsinkable Ship

• Titanic
• 1912
• Great Eastern
• 1858

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The ProblemCollapse of Systems

• Small Scale
• Taiwan Quake
• New Mexico Fire
• September 11
• SARS
• Port Lockout
• Katrina

• Global Scale
• Taiwan Straits
• Tiananmen 2
• India-Pakistan
• Korean Peninsula
• Avian Flu
• Storm, Quake

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The ProblemIndustrial Crash

• Like A Financial Crash
• No Reserves
• No Slack
• No Cash
• But Harder to Fix
• Many Nations
• Many Firms
• Components Not Fungible

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The ProblemNo One is Safe

• Not Our Firms
• Supplies/Services
• Not Our Families
• Food, Medicine
• Not Our Nations
• Political Coercion

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The ProblemNo One is Safe

• Dr. Michael Osterholm
• Epidemiologist
• A major epidemic would crash
• many medical industrial systems.

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How We Got HereGlobalization 1947-1991,
1993-2003

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How We Got HereConsolidation

• Results 2006
• Intel 90
• Cisco 85
• Corning 60
• Polatechno 80
• ARM Holdings 80
• Owens-Illinois 50
• Gillette 70
• Samsung/Korea 60
• Luxottica 5 of 6 chains
• Collins Aikman 90
• Wal-Mart 30 to 55

• Antitrust Reform 1981
• Independence 1776
• Sherman Act 1890
• Robinson Patman 1936
• June 1981 W.F. Smith
• Bigness is not necessarily badness.
• Dec 1981 Jack Welch
• Number one or number two in every business.

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How We Got HereDis-Integration (Outsourcing)

• Vertical Integration 1981
• USA Japan Germany

Firm 1
Firm 3
Firm 2
Firm 4
B
B
B
B
C
C
C
C
D
D
D
D
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How We Got HereDis-Integration (Outsourcing) II

• Complex Integration 2007
• USA Japan Germany

Firm 2
Firm 1
Firm 3
Lead
Tier 1
B Mexico
B Hungary
Tier 2
C Malaysia
C Taiwan
Tier 3
D Thailand
D China
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How We Got HereJust-in-Time Production

• Toyota (a.k.a. Fragile) System
• No Inventory
• Outside Suppliers
• Single Sources
• Extended to Global Scale
• Dell
• Boeing
• GM

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How We Got HereRadical Market Fundamentalism

• Traditional Liberal
  Libertarian
• State Must Play Role. The State
  is Immoral.
• 1793-1981/1993 1981/1993 - Now
• VS.
• Friedrich Hayek Milton Friedman

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Globalization Outsourcing Consolidation
Just-in-TimeBritish East India Co. Reborn

• Trading Company 1757 Trading Company 2007

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Globalization Outsourcing Consolidation
Just-in-TimeDegradation of Systems

• 55
• 50 - 70
• 150 Brands
• Melamine
• 80-100 Offshore

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Globalization Outsourcing Consolidation
Just-in-TimeNo Room for Failure

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Our New GoalA Resilient System

• Get What We Need When We Need It
• Always

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Our New GoalCompartmentalization

• Global Financial System
• Central Banks, BIS, IMF
• Global Energy System
• OPEC, IEA, USG, Refiners, Military
• Food Industrial Systems
• No One Shapes
• No One Responsible
• No One Keeps Track

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Our New GoalLessons From Energy System

• Very Redundant
• Can Absorb Blows
• 90 Normal Supply

Katrina
Venezuela Strike
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How Do We Get ThereNext Global System

• COMPETITION DIVERSITY
• Thomas Macaulay (Corn Law Repeal)
• The greatest independence is dependence on
• the whole world, on every state and climate.
• Archer Daniels Midland (Advertisement)
• What if we looked at the world as one giant
• farm field? In the global food economy,
• every crop will grow where it grows best.

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AMERICAN ANTITRUST INSTITUTE Symposium on Buyer
Power

The Disassembly Line Barry C. Lynn New
America Foundation
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How Do We Get ThereUnderstand Interdependence

• Tom Friedman
• Interdependence Peace.
• History
• Interdependence
• Coercion, Conflict, Shared Disaster.
• Factions in China (Venezuela 2002)
• Third Party (Taiwan 2001)
• Popular Uprising (Tiananmen)
• Exploit Dependence (Germany 1914)

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How Do We Get ThereUnderstand Complexity of
Challenge

• Micro Regulation Wont Work

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How Do We Get ThereNext Global System

• TRADITIONAL, COMMON SENSE
• PRINCIPLES
• Cap Consolidation Antitrust
• (Competition Policy)
• Cap Imports From Any One Nation
• (Trade Policy)
• Re-Professionalize Management
• (The Corporation)

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• All depends on keeping the eye steadily fixed on
  the facts of nature, and so receiving their
  images as they are. For God forbid that we should
  give out a dream of our own imagination for a
  pattern of the world. Francis Bacon, 1620

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20th CenturyNation-Scale Industry

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20th CenturyVertical Integration

• Fords River Rouge
• Ore, Coal, Sand
• At One End
• Finished Cars
• At Other End
• Rubber, Timber, Coal
• Processing, Railroads
• GM, Chrysler, Nash