I was the Risk Manager for a major corporation. As a result, there were many situations where I got to know other Risk Managers for large firms. During the late 1990’s it seemed like every Risk Manager I knew that worked for a company with large manufacturing operations was telling me about his or her company’s plans to move manufacturing overseas. It was very simple, the cost of labor was much lower and they could build things overseas, ship them back to the U.S. and save money.

I was both shocked and horrified by this development. While I understood why it was happening, it just seemed like we were shipping our future overseas. Sadly, that was one prediction that turned out to be extremely accurate. A few years ago, our daughter’s family had a Chinese exchange student live with them for a couple of weeks. He was desperate to find something “Made in America” that he could bring back to China. He had great difficulty finding anything that was not made in China.

The good news is that Donald Trump understands the problem and he is taking necessary action to fix things. One of the reasons the U.S. was so successful during World War II is that we were self-sufficient. That allowed us to become the “Arsenal of Democracy.” My parents lived through the Depression. It is hard for those who did not live through this experience to even comprehend how bad things were. My dad was the only one in his family who had a job, and as a result our family fed several other families.

One day my dad told me that the only reason the Depression ended was the start of World War II. He didn’t mean the fighting. What he meant was that for the first time in decades the United States started making things. At first, they were gearing up to help other countries and then to build up our own troops. The result was that when the war was over, the U.S. had this incredible manufacturing base. When it stopped making the instruments of war, it was ready, willing and able to produce desperately needed consumer goods.

Sadly, much of our manufacturing base was transferred overseas. This reminds me of a friend who manufactured chairs for nail salons. He had a great business model and was very successful. Then one day he learned that nail salons were purchasing chairs from China for less than it cost my friend to produce them here in the U.S. He simply could not compete. He ended up shutting down his factory and laying off all the employees.

It seems likely that similar stories were happening all over the country. We tend to think of manufacturing firms as large conglomerates such as GM and Ford. But in reality, there were smaller firms who thrived, including those who provided critical products to companies such as GM and Ford. When major companies started producing things overseas, it affected a lot of much smaller companies.

This it dawned on me that this was a risk management problem. In this case, “risk avoidance“. Companies were shifting production overseas because they could not risk being undercut by competitors. The different in cost was so massive that the cost of transporting goods from overseas back to the U.S. was no longer a factor. Trump changed all that by using tariffs. Suddenly, companies can either pay extra money for labor and production, or they can pay more money for transport and taxes. It is really that simple. Suddenly producing things in the United States makes more sense financially. Incredibly, something this simple has the potential to change the world.

Trump also made another risk management decision. During his first four years an entrenched bureaucracy was engaged full time in resisting him. They had the full cooperation of the Democrat Party and the MSM. Then when, thanks to all mail-in voting, Joe Biden was selected, in theory, to be President of the United States. Trump was given four years off to reflect on this. The solution, this time, was “loss control.” He is solving the problem of being slowed down by the entrenched bureaucracy by adopting loss-control measures.

Democrats thought they were permanently in power, but there was a problem. When Democrats are in power, they self-destruct. Despite their best efforts, they did it again. Now Trump is back, Joe is beyond irrelevant, and Trump, having learned his lesson, is purging the bureaucracy of the unelected mob who felt entitled to run everything. It is working faster and more efficiently than anyone thought possible. It is working because Trump now understands the problem. It is also working because, as Margaret Thatcher once said, “the problem with socialism is that eventually they run out of other people’s money.” It is also working because people, ready, willing and able to work for a living are sick and tired of seeing lazy arrogant people, considered immune from criticism, thrive by lusting after public handouts.

Risk management in action. Fun to watch.

TDM