“When trade stops, war comes.” – Jack Ma
In his outstanding book, Chaos: Making a New Science, James Gleick tells the story of famed mathematician and meteorologist Edward Lorenz and his accidental discovery of what would become known as modern chaos theory. While at the Massachusetts Institute of Technology in 1961, Lorenz was simulating global weather patterns on a primitive computer using just 12 variables (temperature, pressure, wind speed, and so on). He also used simple equations that approximated how these variables interacted with each other. Once an initial value for each input was fed into the computer, Lorenz’s calculated virtual world experienced shifting weather patterns in ways that were strikingly similar to terrestrial reality.
Things got interesting when he attempted to replicate a simulation he had previously performed. Instead of starting over with the exact same inputs, Lorenz decided to save computing time by punching in data from mid-way through the prior run. We let Gleick tell the rest of the story:
“This new run should have exactly duplicated the old. Lorenz had copied the numbers into the machine himself. The program had not changed. Yet as he stared at the new printout, Lorenz saw his weather diverging so rapidly from the pattern of the last run that, within just a few months, all resemblance had disappeared. He looked at one set of numbers, then back at the other. He might as well have chosen two random weathers out of a hat. His first thought was that another vacuum tube had gone bad.
Suddenly he realized the truth. There had been no malfunction. The problem lay in the numbers he had typed. In the computer’s memory, six decimal places were stored: .506127. On the printout, to save space, just three appeared: .506. Lorenz had entered the shorter, rounded-off numbers, assuming that the difference—one part in a thousand—was inconsequential.”
So was born the concept of sensitive dependence on initial conditions, known more popularly as “The Butterfly Effect,” a nod to the phenomenon of a mere butterfly flapping its wings that can eventually impact regional weather patterns. In the years following this serendipitous observation, a deeper understanding of complex, non-linear systems developed. The crowning, unsettling realization from Lorenz’s work is that many systems, like the weather and the economy, can never be accurately modeled over any meaningful time frame, no matter the horsepower of the computers or the precision of the measurements. (This insight begs the question of why so many put faith in central planners to manipulate the economy to control the weather—the coupling of two miracles. Best not to ponder the obviousness of such observations in polite circles, we suppose.)
Who would have considered in their range of economic predictions that one man’s obsession with selling books on the internet in the mid-1990s would lead to an explosion in the construction of warehouses in Southern California decades later? The Amazon Effect that Jeff Bezos uncorked onto the world has led to innumerable tectonic shifts in the way the economy works. Chaos abounds! That particular set of wings flapping brought economic vibrancy to a region with proximity to the Port of Los Angeles, known as the Inland Empire. It has been radically altered as a result. Here’s how the Los Angeles Times describes it (emphasis added throughout):
“E-commerce has created a world where we can order something with a few quick taps on our phones, then find it on the doormat within days (or even hours). For a growing number of consumers, there’s a decent chance the contents of their packages came from a warehouse in the Inland Empire.
The region, which includes large swaths of communities in Riverside and San Bernardino counties, has become the dominion of thousands of massive warehouses, storing millions of consumer goods trucked in from coastal ports and bound for front doors and mailboxes across California and the nation.
According to one research group’s mapping data, warehouses cover more than 1.5 billion square feet of land there (including parking lots). An additional 170 million square feet of warehouses are planned or under construction, enough to cover the city of West Hollywood about three times over.”
To the benefit of local citizens, these warehouses create jobs and fill the coffers of their municipalities. They also allow the state itself to catch a vig for each “Buy now with 1-Click” purchase it enables consumers to make nationwide. Much of our just-in-time supply chains depend on such brutally efficient execution for the economy to hum. The way in which we now transact and consume has changed the area’s economic importance, a transformation evident in data from the Port of Los Angeles itself, which has experienced explosive growth in container traffic during the past 40 years:
The network of warehouses in and around Los Angeles has become a point source of vulnerability to the US economy, one that environmentalists are interfering with by challenging new builds and advocating for change in local zoning laws to retroactively make existing structures more difficult to operate. As warehouses look set to become the next hot battleground in the war on carbon, will these cogs in our non-linear economic system become subject to endless protest and frivolous lawsuits? Is Inland Empire the new Mountain Valley? What unintended consequences might arise from hamstringing the humble warehouse? Let’s hop in the delivery truck and take a drive around.