Nobel Prize winner talks about global supply chain

category:Finance
 Nobel Prize winner talks about global supply chain


Paul Romer started his speech by pointing out that global supply chain is the most important dynamic reflection in modern economic life, and the essence of this dynamic is that the more people there are, the better they will be. In a country or even in the world, with the growth of population, living standards have gradually improved.

Paul Romers view seems to be contrary to peoples conventional cognition, because under the premise of limited resources, the more population, the less resources allocated to each person. In this regard, Paul Romer further explains that in his research, he equates thought with material resources, and claims that the interaction between thought and material produces economic value. Matter is scarce, but thought is not. The ideas here represent soft and recessive resources such as knowledge and technology.

Paul Roemer gives two interesting examples to support his point. The first is an example of a cup and a lid. Coffee shops are often equipped with three kinds of cups according to different customers needs. If the conventional way is adopted, three kinds of cups will naturally be equipped with three kinds of cup caps, but this obviously increases the difficulty of production and matching. And three kinds of cups with a cup cover, the above problem is solved. This small thinking innovation solves the big problems in actual production. This is the value created by thought.

In order to further expound the economic value of the interaction between thought and material. Paul Romer tells the story of the nail factory in the theory of wealth of nations. In his view, division of labor and cooperation is a way to mobilize everyones enthusiasm. These small thinking and skills in these production links gradually accumulate to form a part of skill capital. These things generated by personal thinking can be put into production or trade with others naturally. This is the basis of cooperation between people, enterprises and enterprises, and the logic basis of the formation of supply chain.

The same logic applies to the global perspective. Under the global supply chain, countries and enterprises all over the world benefit from more trade and transportation. Lower transportation costs and improved technology make the world more closely connected. At the same time, it also links billions of workers and markets all over the world. The links in the whole supply chain pay more attention to their own human and material resources investment due to more refined division of labor, so as to create more value.

Hidden dangers behind the dominance of a family

In the past, Global trade has benefited greatly from the supply chain, but will this virtuous cycle continue? Paul Romer specifically suggests that we should pay attention to some of the futures worries.

Paul Romer pointed out that if a company has a lot of material and intellectual resources, it will make other companies rely on it and hinder the operation of the whole supply chain. Especially on the Internet digital platform, such negative effects are more obvious.

If a company, as an intermediary, gathers all the resources of the supply side and the demand side, then the enterprise may become a factor hindering the development of the whole supply chain. Because a dominant enterprise will lead to other small and medium-sized enterprises in the developing stage unable to enter the board, they can only choose to rely on large enterprises, and large enterprises do not need to innovate and upgrade, eventually leading to the stagnation of the whole chain.

Paul Romer says we all need a system of survival of the fittest, where new companies join in to replace companies that only occupy resources and profit but dont want to make progress. The same is true for all countries in the world. Although some means can prevent competitors from entering the domestic market, they also stifle the birth of new creativity and new productivity, allowing the existing forces to control the supply chain, resulting in the lack of development vitality of the whole supply chain.

As a result, Paul Romer said that countries need to take action to create a level playing field for enterprises to survive and enhance the vitality of global supply chains. The same is true for countries. The United States is the largest economic power in the traditional sense, while China, as a new important economic power, is rapidly increasing its share in world economic activities. When the status of a traditional power is challenged by another rapidly rising country, friction will inevitably occur.

Paul Romer said that such competition and friction are not necessarily bad things, because, like enterprises, if a country can not feel competition, it will not be able to stay at the forefront of innovation and growth for a long time, which will eventually lead to the lack of vitality in the global economic development.

Paul Romer also cited a single crop in farming as an example. If only one variety of crop is planted, great losses will be caused in case of disease, while introducing more varieties can greatly resist the disease. In translation, a hundred flowers bloom and a hundred schools of thought contend is the most scientific development mode.

Trust makes adversaries become partners

Paul Romer further elaborated that in order to achieve a level playing field, it is necessary to establish a trust system that adheres to each other. Enterprises in the supply chain must have the ability to identify reliable suppliers, otherwise they will suffer losses. Especially in the modern digital platform, some enterprises with a very strong market position can control this trust and bring a fatal blow to the environment of fair competition.

Paul Romer cited a well-known computer manufacturer as an example. It provided so-called free services to cooperative enterprises, but behind the so-called free services, there were many pitfalls hidden behind the so-called free services, which made the cooperative enterprises get deeper and deeper, and finally they could not extricate themselves and could only follow the command. This kind of predatory strategy takes advantage of the interests of others, rather than for the purpose of win-win communication. As a result, the whole supply chain has stopped innovation and breakthrough, and every enterprise in the chain has been eaten back. He also talked about the case of Boeing in the United States. Boeing was originally the dominant company, but it gradually formed a corporate culture that did not want to be disclosed because of its fear of lawsuits brought by accidents. This leads to a growing sense of distrust of the company from the outside world, and a weaker sense of trust in the whole supply chain. When the company encounters the work that is not good at such as writing complex software, it will encounter great obstacles. If this enterprise is just a monopoly enterprise, it will inevitably bring crisis to the whole industry. Therefore, Paul Romer stressed that cultivating more competitors and establishing a more open, transparent and trusted competition system are crucial to global economic development. In Paul Romers view, trust can make opponents become partners, and make everyone symbiotic and win-win. Source: Netease Financial Editor: Zhang Mei_ NF2100

Paul Romer cited a well-known computer manufacturer as an example. It provided so-called free services to cooperative enterprises, but behind the so-called free services, there were many pitfalls hidden behind the so-called free services, which made the cooperative enterprises get deeper and deeper, and finally they could not extricate themselves and could only follow the command. This kind of predatory strategy takes advantage of the interests of others, rather than for the purpose of win-win communication. As a result, the whole supply chain has stopped innovation and breakthrough, and every enterprise in the chain has been eaten back.

He also talked about the case of Boeing in the United States. Boeing was originally the dominant company, but it gradually formed a corporate culture that did not want to be disclosed because of its fear of lawsuits brought by accidents. This leads to a growing sense of distrust of the company from the outside world, and a weaker sense of trust in the whole supply chain. When the company encounters the work that is not good at such as writing complex software, it will encounter great obstacles. If this enterprise is just a monopoly enterprise, it will inevitably bring crisis to the whole industry. Therefore, Paul Romer stressed that cultivating more competitors and establishing a more open, transparent and trusted competition system are crucial to global economic development. In Paul Romers view, trust can make opponents become partners, and make everyone symbiotic and win-win.