(Not knowing if there's a character limit here, I'll follow-up to the question about monopolies.)
I find Deming's view of monopoly to be rather strange.
## First:
Because it's one of very few aspects of his System of Profound Knowledge that are not backed up by available data. Likewise, Deming's view of competition is not backed up by data. For example, he asserts that competition is destructive and such destruction should/can be avoided in a monopolistic context; and he asserts that monopolies enable the reduction of competition which, he says, can lead to 'Win/Win'.
But I think these are faith-based claims rather than empirical claims.
Of course, if we look *only* at the activities in Japan at the time, then it may appear there's truth in those assertions. I understand the temptation to argue Japan's companies acted monopolistically, with cohesion, with cooperation, and *ta da* — look at the 'Win/Win' they achieved. They achieved high-quality products and improved Japan's economy tremendously!
But that's the wrong level of analysis. That's only half the story. Japan and it's various monopolies that Deming praises had fierce competition and a common enemy: the USA.
## Second:
The data tell us that the monopolies in Japan that succeeded (in part due to Deming's influence) were the result of extreme force: I'm referring to the nationalistic and protectionist policies that compelled (or "enabled" if you prefer) Japan's industrial giants to cooperate.
Worldwide, the data tell us that monopolies often sprout from innovative entrants in the free market (Apple in early 1980s, AT&T in 1880s), and those same monopolies often persist due to regulations, gov't subsidies, and protectionist policies that are hostile to younger/smaller competitors (Apple & AT&T 2020s, CBC in the 2020s, Air Canada, etc.). These sorts of regulations are predictable in what is called "late-stage" capitalism. Capitalism corrupts toward monopoly and economists (like Friedman) who prefer free market capitalism to other forms (such as "stakeholder capitalism" or "crony capitalism") argued that anti-trust regulations are necessary to preserve a free market that welcomes new entrants.
Is Deming in favour of such protectionist policy-making? Does Deming favour a "planned economy" wherein a government decides the winners of the monopoly game?
## Third:
There's no evidence that monopolies behave better, on average, than other companies. There's no evidence that monopolies are immune to the problems that Deming argues are inherent in the prevailing system of management. In the audio clip, Deming suggests that monopolies would benefit most by "keeping prices low" — but it's pure fantasy to think monopolies would behave that way. Case in point: the government of Canada is a monopoly and it's getting more costly by the day — they have zero incentive to keep prices (i.e. taxation) low.
## Fourth:
Perhaps a few things have been learned about large systems that contradict Deming's opinion about monopolies. For example, Gall would argue that large systems suffer a higher fiction quotient; their sensory mechanisms are limited and they become incapable of receiving market feedback; large systems produce large problems; and so on.
## Fifth:
In the audio clip you shared, Deming derides the way companies chase "market share" — he argues this is an unhealthy symptom of competition in the market. But available data would show that Toyota competes for market share against other Japanese companies (Honda, Mazda, Isuzu, etc.) AND against American and European companies (GMC, Audi, Tesla) YET the quality and capability of Toyota (as a company) continues to advance. I'd argue, a market open to new entrants and competition has required that they find ways to employ people at competitive rates, and deliver higher quality products at lower prices. (Win Win Win!)
I challenge David on this statement: But that's the wrong level of analysis. That's only half the story. Japan and it's various monopolies that Deming praises had fierce competition and a common enemy: the USA.
The USA was NOT fierce competition. They were a pushover: terrible and even dangerous quality, e.g. the Ford Pinto, the noisy gas guzzlers, the Harley Davidson bikes that dripped oil even in the showrooms, the worst tv in the Western World ( I was shocked when I was working in Chicago and Washington at the blurred wrong colour hotel tvs.) Sony tv had a walkover. The same thing happened with British cars, bikes - but not tvs, which were/are excellent.
So what David misses was that the Japanese were competing to best meet real customer needs, which were for reliability, quiet running, interiors designed for maximum co fort and safety, and bikes that did not need a kickstart, i.e., competing on QUALITY.
There are many other assertions I could challenge, but I will wait for a response
Japanese companies led with quality. That's how they 'won' against their American competitors. But there was competition no less.
My point remains. Japanese companies entered a contest against the incumbents in USA. And the incumbents didn't just roll over and cede the market to Japanese manufacturers. While they couldn't win on quality, they retaliated with protectionist "Buy American" marketing, they lobbied US government for higher tariffs on imports, etc. It's not wrong to describe their competitiveness as fierce.
David, I suggest you check your competition paradigm. Its kind of like McCarthy seeing communists everywhere that you see "contest", (fierce) "competition against" where it is not. The only fierce competition was USA car companies AGAINST other USA car companies, not FOR customer satisfaction. They were not building a better mousetrap. The Japanese were.
In so doing you dilute your own good argument that the USA car companies cried "not fair" to the government, i.e. protect us! And this while they went on squeezing their suppliers and dealers, and aggravating employee relations. I was introduced to Deming by a senior UAW representative because he saw what the bosses did not, i.e. continuous quality improvement increases sales and secure worker jobs.
I could say the same for you. If you're focused on the activities of automobile manufacturers, I'd argue that's the wrong level of analysis. It's important to remember that car companies in USA and Japan are part of larger systems - states. Each state has intervened (for better or worse) and their forceful influence is exerted in the form of: foreign policy, monetary policy, taxes and subsidies, tariffs, anti-trust legislation, etc.
I am not denying the politicking; but you are not being competitive when you want the government to favour your inferior products just because they are American. That is what the USSR and East Germans did.
The USA customers wised up and bought Toyota and Honda even though they were Japanese because they outclassed the USA equivalent and were still cheaper.
That is the market talking, over the “patriotic” cry babies who were turning out inferior products, including BTW food stuffs.
Good stuff Chris!
Thanks, Eric!
(Not knowing if there's a character limit here, I'll follow-up to the question about monopolies.)
I find Deming's view of monopoly to be rather strange.
## First:
Because it's one of very few aspects of his System of Profound Knowledge that are not backed up by available data. Likewise, Deming's view of competition is not backed up by data. For example, he asserts that competition is destructive and such destruction should/can be avoided in a monopolistic context; and he asserts that monopolies enable the reduction of competition which, he says, can lead to 'Win/Win'.
But I think these are faith-based claims rather than empirical claims.
Of course, if we look *only* at the activities in Japan at the time, then it may appear there's truth in those assertions. I understand the temptation to argue Japan's companies acted monopolistically, with cohesion, with cooperation, and *ta da* — look at the 'Win/Win' they achieved. They achieved high-quality products and improved Japan's economy tremendously!
But that's the wrong level of analysis. That's only half the story. Japan and it's various monopolies that Deming praises had fierce competition and a common enemy: the USA.
## Second:
The data tell us that the monopolies in Japan that succeeded (in part due to Deming's influence) were the result of extreme force: I'm referring to the nationalistic and protectionist policies that compelled (or "enabled" if you prefer) Japan's industrial giants to cooperate.
Worldwide, the data tell us that monopolies often sprout from innovative entrants in the free market (Apple in early 1980s, AT&T in 1880s), and those same monopolies often persist due to regulations, gov't subsidies, and protectionist policies that are hostile to younger/smaller competitors (Apple & AT&T 2020s, CBC in the 2020s, Air Canada, etc.). These sorts of regulations are predictable in what is called "late-stage" capitalism. Capitalism corrupts toward monopoly and economists (like Friedman) who prefer free market capitalism to other forms (such as "stakeholder capitalism" or "crony capitalism") argued that anti-trust regulations are necessary to preserve a free market that welcomes new entrants.
Is Deming in favour of such protectionist policy-making? Does Deming favour a "planned economy" wherein a government decides the winners of the monopoly game?
## Third:
There's no evidence that monopolies behave better, on average, than other companies. There's no evidence that monopolies are immune to the problems that Deming argues are inherent in the prevailing system of management. In the audio clip, Deming suggests that monopolies would benefit most by "keeping prices low" — but it's pure fantasy to think monopolies would behave that way. Case in point: the government of Canada is a monopoly and it's getting more costly by the day — they have zero incentive to keep prices (i.e. taxation) low.
## Fourth:
Perhaps a few things have been learned about large systems that contradict Deming's opinion about monopolies. For example, Gall would argue that large systems suffer a higher fiction quotient; their sensory mechanisms are limited and they become incapable of receiving market feedback; large systems produce large problems; and so on.
## Fifth:
In the audio clip you shared, Deming derides the way companies chase "market share" — he argues this is an unhealthy symptom of competition in the market. But available data would show that Toyota competes for market share against other Japanese companies (Honda, Mazda, Isuzu, etc.) AND against American and European companies (GMC, Audi, Tesla) YET the quality and capability of Toyota (as a company) continues to advance. I'd argue, a market open to new entrants and competition has required that they find ways to employ people at competitive rates, and deliver higher quality products at lower prices. (Win Win Win!)
I challenge David on this statement: But that's the wrong level of analysis. That's only half the story. Japan and it's various monopolies that Deming praises had fierce competition and a common enemy: the USA.
The USA was NOT fierce competition. They were a pushover: terrible and even dangerous quality, e.g. the Ford Pinto, the noisy gas guzzlers, the Harley Davidson bikes that dripped oil even in the showrooms, the worst tv in the Western World ( I was shocked when I was working in Chicago and Washington at the blurred wrong colour hotel tvs.) Sony tv had a walkover. The same thing happened with British cars, bikes - but not tvs, which were/are excellent.
So what David misses was that the Japanese were competing to best meet real customer needs, which were for reliability, quiet running, interiors designed for maximum co fort and safety, and bikes that did not need a kickstart, i.e., competing on QUALITY.
There are many other assertions I could challenge, but I will wait for a response
Dr John Carlisle, Sheffield UK
Hi,
"so what David misses…"
??
That's a strange comment. And wrong.
Japanese companies led with quality. That's how they 'won' against their American competitors. But there was competition no less.
My point remains. Japanese companies entered a contest against the incumbents in USA. And the incumbents didn't just roll over and cede the market to Japanese manufacturers. While they couldn't win on quality, they retaliated with protectionist "Buy American" marketing, they lobbied US government for higher tariffs on imports, etc. It's not wrong to describe their competitiveness as fierce.
David, I suggest you check your competition paradigm. Its kind of like McCarthy seeing communists everywhere that you see "contest", (fierce) "competition against" where it is not. The only fierce competition was USA car companies AGAINST other USA car companies, not FOR customer satisfaction. They were not building a better mousetrap. The Japanese were.
In so doing you dilute your own good argument that the USA car companies cried "not fair" to the government, i.e. protect us! And this while they went on squeezing their suppliers and dealers, and aggravating employee relations. I was introduced to Deming by a senior UAW representative because he saw what the bosses did not, i.e. continuous quality improvement increases sales and secure worker jobs.
I've checked my competition paradigm, thanks.
I could say the same for you. If you're focused on the activities of automobile manufacturers, I'd argue that's the wrong level of analysis. It's important to remember that car companies in USA and Japan are part of larger systems - states. Each state has intervened (for better or worse) and their forceful influence is exerted in the form of: foreign policy, monetary policy, taxes and subsidies, tariffs, anti-trust legislation, etc.
To deny the effects of state actors is a mistake.
I am not denying the politicking; but you are not being competitive when you want the government to favour your inferior products just because they are American. That is what the USSR and East Germans did.
The USA customers wised up and bought Toyota and Honda even though they were Japanese because they outclassed the USA equivalent and were still cheaper.
That is the market talking, over the “patriotic” cry babies who were turning out inferior products, including BTW food stuffs.