The Bullwhip Effect

How small changes in customer demand can produce considerable disruption upstream in the supply chain. For instance, a sudden surge in the buying of toilet paper may cause retailers to put in larger orders to make sure they can keep up with demand. Manufacturers, in turn, may put in even larger orders for raw materials to make sure they don’t get caught out. In the meantime, customers had bought all the toilet paper they ever needed and demand suddenly dropped causing retailers to cancel all their orders, manufacturers to halt production and suppliers to be left with big stockpiles of unwanted raw materials.

I learned about the bullwhip effect from Tomas Tunguz where he considers economic effects of the coronavirus. He explains it with a brewery example in his article on proxy metrics for startups .

Published 5 Apr 2020

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The Diderot effect describes how new purchases can lead to a negative spiral of replacing possessions that no longer live up to the new standard. In a capitalist or consumerist society, it highlights the dangers of material possessions on ourselves and our finances. "Regrets on Parting with My Old Dressing Gown." The effect is named after 18th-century French philosopher Denis Diderot, who wrote the entertaining and unusually-titled essay "Regrets on Parting with My Old Dressing Gown." In the essay, Diderot relates how his possessions no longer seemed up to scratch after being given a flashy new scarlet dressing gown. Seeing this, he replaced his old straw chair with a leather one, a plank bookshelf with an inlaid armoire, a clay statue with a bronze statue, and so on. In the process, he emptied his carefully earned savings. His tale is an example of the Diderot Effect in action. What's more, Diderot complains that whereas he was the master of his old dressing gown, he became a servant to the new one, needing to guard it from his clumsiness, spills, or burns. Our possessions can begin to control us rather than us control them. New and Old Identities More generally, the effect also highlights that we surround ourselves with objects that fit our sense of identity. When we receive something that reflects a new, aspirational identity, rather than rejecting the new thing, we may find ourselves replacing our old objects and selves to fit the new. Sometimes, we may be excited about embracing a new identity. Clearing out items reflecting our old selves may be a blessing and reflect aspects of our lives we wish to leave behind. Yet it perhaps pays to consider whether it's driven by the products or ourselves—whether we're still the masters or whether they are. As I learned from Dev Patnaik, products are created by culture and create culture. Examples of the Diderot Effect Here are some examples of the Diderot Effect in action that I could relate to: Denis Diderot gradually replacing his possessions with fancier more expensive ones and becoming poor as a result. Replacing my hastily bought student furniture with smarter furniture for our own home. Adding a new smart painting to a wall causing you to take down your old music posters. A new pair of shoes causing me to reconsider the whole outfit. Notes Cultural anthropologist Grant McCracken introduced the Diderot Effect, which I learned about from James Clear's Atomic Habits. As I learned from Seth Godin's Akimbo podcast episode — The Deletionists, Diderot also played a key role in the development of the encyclopedia. The Diderot Effect appears in my book Big Ideas Little Pictures. Here's a translation of Denis Diderot's essay "Regrets for my Old Dressing Gown, or A warning to those who have more taste than fortune" Related Ideas The paradox of choice The Streisand effect Front stage, back stage The Paradise Paradox Sharpen the saw Enough molehillls make a mountain Implementation intentions…The Diderot effect describes how new purchases can lead to a negative spiral of replacing possessions that no longer live up to the new standard. In a capitalist or consumerist society, it highlights the dangers of material possessions on ourselves and our finances. "Regrets on Parting with My Old Dressing Gown." The effect is named after 18th-century French philosopher Denis Diderot, who wrote the entertaining and unusually-titled essay "Regrets on Parting with My Old Dressing Gown." In the essay, Diderot relates how his possessions no longer seemed up to scratch after being given a flashy new scarlet dressing gown. Seeing this, he replaced his old straw chair with a leather one, a plank bookshelf with an inlaid armoire, a clay statue with a bronze statue, and so on. In the process, he emptied his carefully earned savings. His tale is an example of the Diderot Effect in action. What's more, Diderot complains that whereas he was the master of his old dressing gown, he became a servant to the new one, needing to guard it from his clumsiness, spills, or burns. Our possessions can begin to control us rather than us control them. New and Old Identities More generally, the effect also highlights that we surround ourselves with objects that fit our sense of identity. When we receive something that reflects a new, aspirational identity, rather than rejecting the new thing, we may find ourselves replacing our old objects and selves to fit the new. Sometimes, we may be excited about embracing a new identity. Clearing out items reflecting our old selves may be a blessing and reflect aspects of our lives we wish to leave behind. Yet it perhaps pays to consider whether it's driven by the products or ourselves—whether we're still the masters or whether they are. As I learned from Dev Patnaik, products are created by culture and create culture. Examples of the Diderot Effect Here are some examples of the Diderot Effect in action that I could relate to: Denis Diderot gradually replacing his possessions with fancier more expensive ones and becoming poor as a result. Replacing my hastily bought student furniture with smarter furniture for our own home. Adding a new smart painting to a wall causing you to take down your old music posters. A new pair of shoes causing me to reconsider the whole outfit. Notes Cultural anthropologist Grant McCracken introduced the Diderot Effect, which I learned about from James Clear's Atomic Habits. As I learned from Seth Godin's Akimbo podcast episode — The Deletionists, Diderot also played a key role in the development of the encyclopedia. The Diderot Effect appears in my book Big Ideas Little Pictures. Here's a translation of Denis Diderot's essay "Regrets for my Old Dressing Gown, or A warning to those who have more taste than fortune" Related Ideas The paradox of choice The Streisand effect Front stage, back stage The Paradise Paradox Sharpen the saw Enough molehillls make a mountain Implementation intentions

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