Here is one you never heard of before. "Capacity Limit" Now, what is that? I did a blog on competition a while back and this is a new slant. It is a little different from competition in that when the leading competitor reaches their production limit competition shifts to the capacity limit. Here is how it works.
Let's say that you are a shoe maker and by far the best on in the area. Your shoes are better and cheaper so everyone wants your shoes. I make shoes too, but mine are not as good and cost a lot more. I am in competition with you and you have just about put me out of business. As it turns out, there are a lot more people looking for shoes than the number of shoes that you can make. Now, this is where I come in. The customers who you have to turn away come to me and by my shoes. This is because you have hit the "Capacity Limit". I'm sure you never studied this in your economics 101 class because they were never talking about the real world. Now, why am I bring this up?
We see this going on every day. Didn't you ever wonder where all those strange brands of products came from? When I was in Eastern Europe several years ago, I noticed that hand tools like shovels were on a strange poor design and quality. This was because of a "Capacity Limit" on the good tools. Now, you must be asking why this is important. Well, time change and they now seem to be changing even faster. Historically, many products were limited by the supply of local resources like wood, stone or coal and even skilled labor. Things have changed with two important things. Transportation now allows us to secure resources from any place in the world at minimum extra cost. How much do you think it cost to ship a gallon of oil half way around the world in a super tanker? Not much. How about a pipe line? That is even cheaper. This means that "Capacity Limits" which used to protect local production of products no longer exists. Some of the limits used to be education, capital and energy, but they are gone now. Automation has, alone, removed the capacity limits on labor for many items.
See how this works? If you look back, that world was much different from the world of today, yet we still try to apply the old rules of the past that used to work. The future is different from the past and we have to adjust to the future. It starts by recognizing that the past is not a very good predictor for the future and that will be very difficult for most of us. Our educational system is a backward looking institution and that has to change. Just like the old "Capacity Limit" we will not have things like that to protect us in the future. Think about it.
