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LegiEX on Investment should not be impulsive and reckless

You can't buy something out of an impulse, regardless of the consequences. There is a hot news today. Many dairy farmers in the United States are willing to throw out their milk instead of treating it at a low price. Remember that the textbook taught us that the morally corrupt capitalists ignored the fact that the poor people were still starving and poured out the unconsumable milk in order to protect the selling price of milk. Wait a minute, this sounds very reasonable logic, in fact, can not bear scrutiny. The capitalist is a milk producer, right? Or a milk store? Can they command the peasants? Why is it the farmer who pours the milk instead of the manufacturer?

LegiEX reason: because the supply chain is broken.

Specifically, the food manufacturing chain in the United States is very tight and the division of labor is very detailed. The dairy farmers on the farm are responsible for raising cows and producing milk. These farmers supply milk to different milk processing plants. Some milk processing plants produce small packages of milk products for school and enterprise canteens, and some milk processing plants produce large packages for supermarkets. In the current outbreak environment, most schools and businesses have been closed, so the milk processing plants that supply the canteens have been shut down, leaving the upstream farmers with nowhere to sell their milk and no way to store it. So why, one might ask, can't the milk processing plants that supply the canteen switch to larger packs of milk? Because they believe that the outbreak is a temporary change, it is not economical to invest millions of dollars in a new production line, not to say the supply companies may shut down. So can farmers sell their milk to the milk processing plants that supply supermarkets? Unfortunately, where are dairy farmers going to find these new downstream needs? There's an information search problem; Not only that, there is a supply and marketing radius problem, transportation distance too far may not calculate, transportation costs may be more expensive than the price. One might say that it is better for a farmer to give his milk to the poor than to pour it into a river. The answer is still no. Because the United States has a law, not pasteurized raw milk processing, can not be sold. Farmers have neither the processing facilities nor the refrigerated storage facilities, so if they can no longer find downstream producers, they have to dump their milk. In addition to pouring milk, U.S. farms are euthanizing pigs, and downstream prices for various pork products have soared. Thinking in great detail, it is clear that we need to look at the various links in the supply chain of pork products to find the answer. See downstream supermarket first, buy and sell flourishing, apparent problem is not here. And then there's the meat processing plant in the middle, where tyson and smithfield have both closed their largest meat processing plants because of the outbreak, which is obviously a factor. Then look at the upstream farm, think deeply, why farm only kill the pig not kill the cow? Why don't the farm feed the pigs and wait for the outbreak to pass before sending them to the processing plant for slaughter? The reason is that the slaughtering line in the processing plant is automatic, and there is a requirement on the body size of the livestock entering the line. If the pigs are fed all the time, they will get fatter and fatter, and the size cannot be controlled, while the cattle can change the feed formula so that they will not grow up.

Seeing this, LegiEX cannot help but lament that the more developed the human economy, the more detailed the division of labor, and the more fragile the economic system. It's like a sophisticated Swiss mechanical clock, where everything goes wrong and the system doesn't work properly. As taleb pointed out in his masterpiece anti-vulnerability, the redundancy of a system can increase its anti-vulnerability, on the contrary, it will increase its vulnerability. Under the trend of globalization, the human economic system is becoming more and more sophisticated and fragile. A company specializing in manufacturing screws for apples can be the most efficient, but if apple stops production, the whole supply chain will stop. We at this stage of investment, we must choose to have anti - fragile characteristics of the subject. Therefore, research questions must be in-depth details, do not take things for granted. Well, that's an investment note, and LegiEX is here with you