Our thinking about economics and technology and history is full of standard “wisdom” that isn’t remotely true when you stop to think about it.
Ran into a couple of those standard wisdoms in automotive articles this week. Collectible Auto mag has a feature on the ’28 to ’30 Cadillac. The author commits two standard wisdoms at once:
No one could have foreseen how much worse things would become.
Crap. The bankers who planned the boom “foresaw” the bust in the same way that I “foresee” taking a shower and going to bed each night. When an event is part of your plan, you can “foresee” it perfectly. Booms and busts are just as regular as shower and bed. Booms are planned to enrich the rich and kill the poor, and the rich always know when to hit the sack.
But how much better would GM’s story have been if the decade-long economic disaster hadn’t struck just as its best-yet cars and engines burst on the scene? Sadly, we’ll never know.
Also crap. From 1920 to 1930 automobiles were IDENTICAL AND UNCHANGED. All brands looked the same and all years looked the same. Change started in 1932 with the Willys 77, and change grew more powerful every year. 1930 and 1940 cars are entirely different types of machine. The brands in 1940 came in a huge range of size and style and power. When companies can profit without change, they will. When change is necessary for survival, change occurs.
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An article in Curbside Classic makes a more subtle but equally disprovable standard claim. The author is covering the huge variety of off-brand brands made by the Canadian divisions of US companies. At various times each of the Big Three had special brands, which required special tooling to make a Dodge-like grille that fitted onto a Plymouth body, or a superfancy Meteor grille for a Ford body, or Pontiac Silver Streaks shaped to fit a Chevy hood. While covering this wild diversity, the author says:
However, since the Canadian market was always much smaller than that of the United States, the diversity of the products made in Canada was considerably simplified.
‘Economy of scale’ is correct in one way. When you amortize development and factories and administration over a million cars, each car costs less to produce, and can be priced lower. But ‘economy of scale’ works the other way around when discussing smaller companies in smaller niche markets. Smaller companies can turn out a special order for a higher price, and make a profit which is meaningful for their owners. Big companies ignore special orders because their accounting and inventory and manufacturing systems are optimized for maximum quantity and minimum variety.
A special variety might represent 10% of the small company’s LOCAL output for the year, so its profit will make a meaningful difference to the LOCAL owner. The same variety might represent only .00001% of GM’s global output, so it’s definitely not worth the trouble of redoing a globalized setup.