MFG 2.0

Why Don't We Just Start Over?

Like many people in America (and beyond), I've been thinking way too much about the financial sector of our economy. During my travels through the world wide web today, I came across an interesting argument today on the O'Reilly Radar that claims to have an alternative solution to the big bank bailout.

Sal Khan (of the YouTube-based Khan Academy) talks about how the bad debt is worse than we thought (great quote: "If you have a dead skunk in your house, noone's going to notice that the milk has gone bad") but also says that what the government should do with these billions of dollars is to create an entirely new financial infrastructure.

Here's the key paragraph of the argument:

$700 billion is a huge amount of money--more than the equity book values of Goldman Sachs, Morgan Stanley, JP Morgan, Citigroup, Washington Mutual, Bank of America and Wachovia combined. This money should be used to capitalize new banks throughout the country. To be operational as quickly as possible and to preserve valuable human and operational capital, these banks will buy good operational assets from insolvent banks in FDIC receivership. To avoid a concentration of risk, the capital should be distributed amongst at least 20 new institutions. To avoid the hazards of government ownership or sponsorship, the shares of these institutions should be distributed to the American people (each bank can have 300m shares; one for every American man, woman, or child). Rather than using taxpayer money to cushion losses of previous, bad investments, this will allow all of the capital to facilitate lending to the real economy where it will prevent the current recession from becoming a depression and expedite the recovery which would otherwise be many years away. This plan is akin to preserving the body of banks while replacing their old brains (senior management and risk management policies) and their old hearts (balance sheets).

That got me thinking. There's another industry that is clamoring for a bailout -- big auto. Is there a similar plan lying around out there for the automotive sector?

The closest thing that I found is Local Motors. Here's how it describes itself:

Local Motors is a next generation American car company. It is the first disruptive entrant in the US automotive industry in decades and it is the first of its kind.

Local Motors will design, manufacture, and bring to market innovative, safer, more functional, lightweight, efficient cars through a revolutionary, local assembly and retail experience. These cars will revolutionize not only automobiles, but also the very structure of auto-making, auto-selling, and auto-servicing.

We propose to do these things by challenging the paradigm of highly centralized manufacturing, embattled dealerships, and dispersed service locations. Instead, we propose to introduce our new cars by building a national network of local units each capable of manufacturing, sales, and service. The individual units will be supplied by a global "value network" of integrated suppliers of parts and sub-assemblies. Collectively, the units will be linked to a small headquarters providing support for process migration, design commonality and purchasing functions.

Web 2.0 Community
Design style, customer research, career opportunities and demand will be driven by a revolutionary virtual community, which enables styling and features to match unmet customer requirements while retaining full licensing rights.

Environmental Efficiency
Local Motors' lightweight vehicles will reduce carbon and particulate emissions while achieving fuel efficiency of greater than 50mpg initially using conventional internal combustion engine technology. Using proven technologies, Local Motors will immediately address concerns over climate change, fuel costs, and dependence on foreign oil.

If the mass production and marketing methods of Ford and GM ushered in the first generation of automaking, and the lean Toyota Production System ushered in the second, Local Motors represents the first fully functioning "Automotive 3.0" company.

Is it interesting? Definitely. Is it realistic? Well, is it realistic to imagine "business as usual" going forward?

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TAGS: Innovation
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