The Cost of Failure

If you make 1000 one inch widgets in your widget-making factory, they won’t all be one inch long. Some will come out longer, and some will be shorter. There’s a natural statistical variation which if your widget making machines are in good condition, and run by well trained widget-makers will be quite a small variation, or if you are a British manufacturer from the 70’s and 80’s the variation will be massive and that’s why no one bought the lazy crap you made.
The British idea of quality was to make your widgets within a certain tolerance, no bigger than so much, and no smaller than so much. The Japanese realised that only striving for perfection was good enough.

A Japanese Engineer/Philosopher (I can’t remember his name and have a mental block with it being Tamagochi, that’s not it but it’s the best I can do) came up with the idea of measuring the cost of failure caused by a widget not being the perfect size. Once the widget is installed in the machine, and it fails, there is the cost of lost working time, the cost of the repair labour, and finally the cost of the replacement widget. He multiplied that by the probability of his widgets failing before their designed lifespan, and he realised the cost of failure is always disproportionately more than the cost of investing in the process to make the widgets better. I vaguely remember an amazing formula to calculate C.o.F for any widget you might want to make. On that basis he came to the conclusion that it was no less than immoral (his words, albeit in Japanese) to make any widget a size other than the exact size they are supposed to be.

That was in the 1970’s, by the 80’s the Japanese were producing the best products in the world, and by the 90’s everyone in the world knew the Japanese were producing the best products in the world and were desperately trying to understand and copy what and how the Japanese were doing; including getting hairy-arsed Geordie fitters to do Tai Chi at the start of the day on the assembly line. WTF?

I’d been thinking about the Cost of Failure after my engine rebuild. The pistons and the liners are pretty simple parts, and comparatively cheap, but the work required to replace them is disproportionate. Its not a fair comparison because the truck is 21 years old, so they have already outlived their designed lifespan.

But this was in the back of my mind when Ravitej, the CEO of Mago Construction who contacted me out of the blue to help keep the expedition on the road with sponsorship cash, was talking about how sustainable energy infrastructure may be expensive, but the eventual financial cost of not going down that path was much higher.

Lord Stern from the London School of Economics has produced a world renown paper which looks at the financial cost of climate change, compared with the cost of implementing solutions now to avoid the worst effects of climate change. Needless to say it’s much cheaper to deal with it now before it becomes massive.

But the reality is that the pre-emptive cost would have to be paid primarily by the developed, industrialised nations, whereas the picking-up-the-pieces payments would come from the pockets of developing nations.

This is the same issue Tamagochi faced, in that the cost of producing better widgets is borne by the widget maker whereas the cost of repairing a machine with a broken widget is paid by the widget buyer.

However what made Tamagochi a 1970s visionary was that he saw that the widget buyer the widget maker lived in a metaphorical symbiotic Buddhist temple together and swam in the same sea hunting for prawns as the sun set (my words – I doubt he ever said anything like that, not even in Japanese). Basically the relationship between producer and buyer is tied, so it’s in everybody’s interest to minimise the failure. There are no winners when the widget breaks.

The cost of developing nations struggling with climate change will be evetually be borne out by all nations, directly through increased aid, but indirectly in so many more and expensive ways.