The Red Folder

Archived from April 1, 2024.

Key stories for the week, brought to you by the distinguished newsman Sasha Morel.

Reading for the sake of reading sucks. Telling yourself to read to win a round is nice but ineffective. This condensed news brief helps you understand current domestic and international issues, analyze the news, and gives you opportunities to read more.

Domestic Stories

3 key domestic stories for the week:

1) Broken Bridges, Broken Supply Chain: The Baltimore Bridge Collapse Daniel Song

Baltimore is known as “Charm City,” but the recent headlines about the city have been less than charming. On Tuesday March 26th, 2024, a 985-foot-long cargo ship called the Dali was leaving the Port of Baltimore when it had a complete blackout. This blackout cut off all power, leading to the engine and navigation failing. After the engine and navigation failed, the Dali lost control of its direction, so there was nothing to be done as the ship headed toward the Francis Scott Key bridge. The Dali then hit a critical concrete vertical support, known as a pier, that caused the bridge to collapse. 6 people are presumed dead. Unfortunately, 8 bridges across the U.S. have vulnerabilities similar to the Francis Scott Key bridge. These 8 bridges all contain “fracture critical members,” meaning a single steel component could cause the bridge to collapse. In the aftermath of the collapse, experts strongly urge bridges to install warning systems, which would decrease the risks and fatality of a collapse.

The implications of the bridge collapse are significant for supply gains as Baltimore is a major auto and car shipping center of the East Coast. Dr. Tinglong Dai, a management professor at Johns Hopkins University, compared Baltimore’s importance to U.S. supply chains to Taylor Swift, saying that even if shipping is temporarily interrupted for a few weeks, it will significantly damage the local economy and strain supply chains. Over 800,000 vehicles go through the Port of Baltimore every year, so it might be a Cruel Summer for consumers because of a delay in car deliveries.

Beyond the temporary disruption in shipping, the Francis Scott Key bridge collapse is a helpful window into the fragility of the U.S.’s supply chain. Before the COVID-19 pandemic, companies adopted a “just-in-time” approach to supplies where they kept a very low inventory to reduce costs and relied on other parts of the supply chain to deliver needed materials “in time”. During the COVID-19 pandemic, consumer demand sharply increased for goods used at home while quarantines and health precautions led to shipping slowdowns and port closures. This led to the “just-in-time” model breaking down as necessary parts did not arrive on time and inventory quickly ran out. As such, inflation increased sharply. For example, the average new car price soared 12% and hit a record high of $38,255 during the pandemic.

Learning from the pandemic, policymakers are taking action to improve US supply chain resiliency. The Biden administration has promoted a policy of reshoring, or the relocation of critical manufacturing industries back to the U.S. from foreign countries like China. The 2022 Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act invests $39 billion in domestic semiconductor manufacturing by giving tax credits for companies like Intel to manufacture semiconductor chips in the United States. This legislation aims to protect the U.S.’s supply of important manufactured goods like semiconductors in the case of another supply chain disruption such as a pandemic or geopolitical conflict. The latest figures on March 18th, 2024 shows that private companies have announced investments of $676 billion in domestic manufacturing.

Read more here:

Darrell West, Brookings Institution
Council of Economic Advisors, The White House
Marc Labonte, Congressional Research Service

2) Bayer’s Changing Big Business Sasha Morel

Bayer is usually known as that one German company that makes aspirin - a lot of aspirin. However they’ve become well known most recently for a different reason: a new business model. They call it “Dynamic Shared Ownership” or DSO, and it’s wildly unique compared to not just industry standards, but how businesses in general operate.

Why is Bayer changing its system? Bayer has been on a blunderous run recently, and by recently it’s more like the past couple of years. The FDA and other international drug agencies have been unkind to Bayer in afresh drug trials, notably blocking blood thinners such as CIPRO (Ciprofloxacin Hydrochloride) that would’ve produced 5 billion dollars in revenue.

What is DSO? As Bill Anderson, the CEO of the company explains it, it’s a way to de-bureaucratize the business structure. Businesses tend to be controlled by big bosses and middle men, who command the work for people who are their subordinates. Yet DSO is a departure from this structure, here’s how it’s fundamentally different.

Unlike conventional top-down approaches where decision-making authority is concentrated at the top of the organizational pyramid, DSO distributes ownership and responsibility across all levels of the company. This decentralized approach empowers employees to take ownership of their work, make autonomous decisions, and contribute directly to the company's success. By breaking down silos and fostering a culture of collaboration and accountability, DSO promotes agility and innovation, enabling companies like Bayer to adapt more quickly to market changes and capitalize on emerging opportunities. Basically, Bayer allows their employees to vote and choose what they work on.

Can it be successful? The question looms large over Bayer's bold move towards Dynamic Shared Ownership (DSO). This innovative business model seeks to streamline operations, increase flexibility, and foster a more dynamic organizational culture. But can it really deliver on its promises?

Initial reactions to DSO have been mixed. Skeptics argue that such a departure from traditional corporate structures could lead to chaos and confusion. After all, hierarchical systems have long been the bedrock of corporate governance, providing clarity in decision-making and accountability. DSO, with its emphasis on shared ownership and decentralized authority, seems like a risky experiment.

However, proponents of DSO point to its potential benefits. By empowering employees at all levels to take ownership of their work and make decisions autonomously, DSO could unleash untapped creativity and innovation within Bayer. Moreover, the flattened hierarchy could facilitate quicker responses to market changes and customer needs, giving Bayer a competitive edge in an increasingly fast-paced industry.

But success will ultimately hinge on Bayer's ability to effectively implement and manage DSO. The company will need to invest heavily in training and development to ensure that employees are equipped with the skills and knowledge to thrive in this new environment. Moreover, clear communication and robust performance metrics will be essential to maintain accountability and drive results.

What does it mean for the rest of the business world? Bayer's embrace of DSO sends a powerful signal to businesses everywhere: the status quo is no longer sufficient. In an era defined by rapid technological advancement and shifting consumer preferences, companies must be willing to adapt and innovate or risk being left behind.

DSO represents a departure from traditional top-down management structures towards a more agile and responsive model. As other companies observe Bayer's journey, they may be inspired to explore similar approaches to organizational design. This could lead to a broader shift in how businesses are structured and managed, ushering in an era of greater autonomy and empowerment for employees.

Of course, DSO is not without its challenges, and not every company will be suited to this model. But by daring to think differently, Bayer is setting an example for the rest of the business world to follow. Whether DSO ultimately succeeds or fails, its impact will be felt far beyond the walls of Bayer headquarters, shaping the future of work for years to come.

Read more here:

3) Congress Tries Compromise (and probably won’t like it) Paul Robinson

In a move which has become more and more difficult in Washington, the US Congress finally passed a budget deal to fund the federal government through 2024. Surprisingly, the 1.2 trillion dollar deal diverged greatly from previous deals. Both Republicans and Democrats believe that their accomplishments are newsworthy, and their base should be happy about it. However, it is what was conceded by both sides that is likely to be much more significant.

Around 20 years ago, politicians on Capitol Hill learned something that has impacted the US government ever since: blocking bills their base sees as harmful has more of an impact than passing bills their base actually wants. A pattern has emerged of fear mongering when an opposing bill is introduced, and celebration when it is blocked. For example, Republicans have played up fears about gun control only to kill gun control bills which their base saw as a serious threat to their safety. Meanwhile, the nationwide ban on abortion introduced by Senator Lindsey Graham was portrayed as a serious threat to women in liberal states despite having virtually zero chance of passing. In all reality, gun ownership would never be banned in Texas, and abortion will remain legal in California. But in both cases, the fact that fears did not come to fruition helped politicians who “protected” their constituents from a “dangerous” bill garner large support and key votes in the next election. This is why it is so hard to get rid of the filibuster: politicians want to be able to block bills more than they want to pass them. It is this trend that has ruled American politics since the turn of the century, and is why progress in America is so notoriously slow. This lesson in psychology is key to understanding the significance of compromises in the new budget, and why it could backfire.

Remarkably, House Speaker Mike Johnson went into the negotiations recognizing that, with Democrats in the Senate and White House, there was simply no way he could possibly get everything Republicans might want. This is how a split Congress is supposed to work; they are expected to compromise with each other. The GOP doubtless wanted harsh immigration policies, for example, but what they got was not even close to what they wanted. They also had to abandon anti-abortion measures in order to get the bill through the Senate.

This compromise was wholly unacceptable to some Republicans, especially with the concessions on immigration. Chip Roy, a Texas Congressman often cited as one of the most extreme members of Congress, dramatically condemned the compromises by stating that “any Republican who votes for this bill OWNS the murders, the rapes and the assaults by the people that are being released into our country.” Mr. Roy was clearly sticking to the playbook of fearmongering to get votes by making such statements as this one and the rather interesting claim that “a vote for this bill is a vote against America.” Marjorie Taylor Greene, the far-right conspiracy theorist who is almost certainly the most infamous politician in America, called for Mr. Johnson to be ousted from office much in the same way as Kevin Maccarthy was after similarly compromising with Democrats. Whether Mr. Roy and Ms. Taylor Greene have made the right call politically remains to be seen.

The Democrats, despite their victories with securing the release of illegal immigrants from detention centers, had to make just as many compromises, if not more. Immigration and Customs Enforcement saw a significant increase in detention capacity, and the bill provided for the hiring of 22,000 more border patrol officers. But both the victories and concessions of both sides seem all but insignificant compared to the mainstay of the bill. That is, the Democrats made a compromise that likely will do more harm to them than anything they could have given Republicans, a compromise that could very well cost them the White House.

In exchange for passage through the House, Democrats agreed to slash funds by hundreds of millions of dollars for the U.N. Relief and Works Agency (UNRWA). The agency distributes the vast majority of humanitarian aid to Gaza in the wake of the Hamas war on Israel, and is a lifeline which is quite literally the only thing allowing hundreds of thousands of Gazans to stay alive.

What was the justification for such a drastic action, you might ask? Israel has claimed that twelve of its 13,000 Gaza employees helped Hamas in its attack on Israel. Notwithstanding the virtually nonexistent impact of such an action when considering the much larger contributions of powers like Iran, whether it happened or not, Israel has not even bothered to release evidence corroborating their story. Without a single piece of hard evidence, the US Congress capitulated to the Israeli ultimatum that humanitarian help must be stopped. This will likely cause the death of numerous Palestinians. And the Democrats signed off on it.

It is no secret that many Democratic voters are furious with Biden for his support of Israel. An entire movement has sprung up with the purpose of threatening his reelection should he continue to support Israel. Many who would normally be guaranteed votes for Democrats are instead choosing not to vote at all. Despite all of this pressure, Democrats made a compromise on perhaps the only issue they cannot afford to. As the impact of this decision becomes more and more obvious, it will become obvious that the GOP is the clear winner of the budget compromises.

However much Democrats might want to change course when they see the full consequences come to fruition, they would have to pass another bill through Congress reversing the action. And if Republicans are smart, they will never let that happen. If Republicans are smart, they will let Biden fry.

In an attempt to keep the government running, in an attempt to approach compromise in a rational way, Joe Biden may have just signed his death warrant. And with it, a lesson will be sent to all current and future politicians: compromise is a death trap. It should be avoided at all costs.