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Affluent Christian Investor | October 15, 2018

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Deflation: The Road to Prosperity

There are many amazing business people, and among their ranks are numerous excellent executives who understand the lean business model.  Also, there are a number of economists with a deep understanding of how to achieve good economies.  Although both of these groups are a minority in their fields, they are there working hard at their craft.  This is a good thing for business since both groups contribute to a more abundant society!

What America lacks are excellent business people who not only understand the lean enterprise, but who also understand good economics and economic systems.  In this regard, there are even fewer, if any, economists who understand the power of lean enterprise.  The lack of such men and women sorely puts a deficit on what the Great American Experiment can achieve.

While the United States has developed and achieved more wealth creation for more people than any civilization in the history of the world, we are missing and actually blind to an incredible tipping point.  This tipping point would propel wealth for everyone to levels unseen before in history.  The potential is at our fingertips.  Will we see it, and then grab it and build it?

My intent with this is to give a nudge in that direction with my book, Deflation: The Road to Prosperity and explain the details behind this interface between lean and good economics.  I intend to begin that conversation with the intention of, and hope for motivating others to take action in that direction and to begin learning how to move forward on this path.  Anyone who has studied the work of Hans Rosling, Jerry Bowyer, and the great Angus Maddison can see the vast potential mankind has within us.  The good news is that there is much more potential remaining within us.  Those who work with organizations that are striving to become a lean enterprise are rewarded with the privilege of frequently witnessing this amazing transformation and creativity.

What if these savvy economists understood both the lean enterprise and its significant economic potential?  Lean leaders have the ability and tools to create environments that support good business enterprises, and for that matter also support individuals building good business operations and services.  If these two groups understood and became deliberate in their intentions and actions, then how high could the level of wealth creation reach?

In this discussion, deflation is defined between the classic definition and the contemporary definition.  The classical definition is the drop in value by the manipulation of credit and currency, while the contemporary definition is drop of the price of goods and services due to productivity improvements.  The contemporary definition is the result of the lean business model.  The drop in price due to productivity improvements, which is accelerated by the lean business model, is mutually beneficial.  It benefits the business, the employees, and the customers; hence, it benefits society overall.

The lean business model is the antithesis of economies of scale.  This is manifested in the form of one-piece flow, which is only achieved and sustained by developing the people of the organization with the skills of solving problems toward this true north.  Economies of scale thinking creates a batch mentality, and therefore creates substantial inventory in the system with long leadtimes as a result of designing processes for batch production.  The lean organization designs and executes toward flow production for the benefit of the customer.  Developing everyone in the organization to solve problems toward this objective ties to the overall business objectives to eventually create an organization which moves at a significant faster velocity, and at a much higher magnitude of wealth creation in service to customers.  In the course of achieving this, the organizational profit increases along with individual incomes at all levels, and prices and leadtimes drop.  Everyone wins and society grows in overall wealth.  This fundamental is the source of why the United States has become the most abundant society in history.

I would like to discover this and see it manifest in the works of business people[1] and economists alike.  I know, it would be simply incredible and revolutionary.  I hope that if you read my book you learn a bit.  More importantly, I hope you will be motivated to want to learn more, and, in turn, strive to do work in these areas.  Learn and experiment, reflect, and repeat.  The lean business model and good economics combination is a frontier we have yet to venture.  I look forward to this journey with as many as possible.  Won’t you step into the Light?

[1] By business people I mean all people whether hourly or salaried, workers or executives; essentially everyone involved in industry, agriculture, business, and services in all capacities.

Jim Huntzinger began his career as a manufacturing engineer with Aisin Seiki (a Toyota Group company and manufacturer of automotive components) when they transplanted to North America to support Toyota. Over his career he has also researched at length the evolution of manufacturing in the United States with an emphasis on lean’s influence and development. In addition to his research on TWI, he has extensively researched the history of Ford’s Highland Park plant and its direct tie to Toyota’s business model and methods of operation.

Huntzinger is the President and Founder of Lean Frontiers and a graduate from Purdue University with a B.S. in Mechanical Engineering Technology and received a M.S. in Engineering Management from the Milwaukee School of Engineering. He authored the book, Lean Cost Management: Accounting for Lean by Establishing Flow, was a contributing author to Lean Accounting: Best Practices for Sustainable Integration.

 

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