April 20, 2022

485: Theory of Constraints Economics: Reality, Freedom and Progress (w/ Jorge Gonzalez Moore)

The only truth is reality. Unfortunately, it is often the first thing to be forgotten.


On today's episode of The Brian Nichols Show, I'm joined by Jorge Gonzalez Moore (Author of Theory of Constraints Economics: Reality, Freedom and Progress) where discuss solutions available to solve our societal and economic woes:

 

"And this is a thing in theory constraints... As you have a system and you need to understand the system. What you want to understand is, what is the core problem, or the constraints of the system.

And all the rest are just undesirable effects of that a fundamental constraint, or fundamental core problem. Okay, let's start listing all the undesirable effects that we see in our daily life dealing with economics.

 

And so the starting point is to list those sets of symptoms. And then, well, the end result, if we're able to find the causality between each of those symptoms, should be the core problem.

And that's where we need to focus everyone to find a solution. 

 

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Transcript

Brian Nichols  0:08  
focus on winning arguments for teaching the basic fundamentals of sales and marketing and how we can use them to win in the world of politics, teaching you how to meet people where they're at on the issues they care about. Welcome to The Brian Nichols Show. Well, have you ever folks, Brian, you're on The Brian Nichols Show. And thank you for joining us on of course, another fun episode, I am as always your humble host. And today we're gonna be talking economics, and we're gonna talk to you about the theory of his string economics, independent verification of Austrian economics with me today, Jorge Gonzalez, more welcome to the program.

Jorge Gonzalez Moore  0:47  
Thank you very much. So pleased that you are having me your program.

Brian Nichols  0:51  
Thanks. Absolutely. Well, thank you for joining me today. And I definitely appreciate you being so quick to turn things around, I sent email what my time this morning was around five or so in the morning, you responded quite promptly. And here we are, it's 10 o'clock your time God bless your recording, I was late because I had a call went a little bit over for the day job. So I already was walking in here with my tail between my legs. But you you are joining us today, because you're bringing a lot of value in terms of approaching Austrian economics and making it very tangible in terms of making things actually better. Especially we're talking about where we see some of the problems right now, especially in our economic system. But before we get there, all right, I'm gonna give you a chance to introduce yourself to The Brian Nichols Show audience. So who are you and what brought you to this world discussing theory of constraint economics here on The Brian Nichols Show?

Unknown Speaker  1:41  
Well, well, first, first of all, again, thank you for having me. And well, my name is Jorge Gonzalez more I am an engineer. And since I was in university, I learned Theory of Constraints, I had I have to say that I actually forgot about it until I was then working in different companies. And then you sense that things especially if the company is quite large things don't always go the way it should you intuitively know something's wrong, something doesn't make sense. So, I went back to the books and to study. So, in essence and and just to give a bit of context, what theory Theory of Constraints is or TOC as it is commonly called, in essence is a maybe people that have studied some statistics, they will be a knowledge knowledgeable of something called the Pareto Principle, which is what they call the 8020 rule or the important few and trivial trivial many. So, and that is very true to a independent variables. However, what theory constraints does is to realize that for the pendant variables, which is a system any system and accompanies a system and even want to look at economics, there is a system. So, they the criticality is even is much larger. So who created theory constraints, a physicist by the name of Eliyahu Goldratt. So he came up with this idea, and through the years a him and of course, all of his collaborators, and people that have studied here constraints have come up with different solutions for things or for areas in any company having to do with operations, sales, projects, etc. So, what are the key things to understand about theory constraints, and if I have to define theory of constraints in one word Galder defined it is basically four. And if you have to define any two words is focus and leverage. So, the whole point is that if you have a system, and it is even more critical, when you have dependent variables, it is not that 20% of your classes will have 80% of the effects, the effect is actually much larger. So in essence, point 1% of your costs will have 99.9% of your effects. So this has a profound meaning, in essence, because it tells you what I mean, it tells you that you need to focus and also on what our where to focus, and it is tied to the scientific method, because it implies the causal effect causality. So understanding what causes what, and also it gives a sense that any system is actually simply simple. If you understand the system of course, if not, but you don't know the causality, you will know the cause and effect. So you will start dealing with that is quite complex, which is usually what you get from any person when asked about a company or a system or a process or that's complex, and its complexity. because we don't understand the causality, but once we get there, it gets much, much simpler. So what I do in my professional career is we'll try to apply theory constraints. But I've always been surprised why it is not taken more seriously, if you like. So my determination was, well, why don't we try to solve using this tool, something that we all see every day. And well, the economy is something that we all need to endure every day. And if we can do that, then while people will start paying more attention to to see, but also they will start understanding what they actually live. And that's where I came to study economics, and of course, Austrian economics. And I think that for for those of you who see the program, you understand difference when anybody says Austrian economics and not just Ganesh in economics or something, something else, which is in my opinion, not actually economics. So I don't know, of any any, any opinion on that. But that that's that so I believe, we should see it should be or should in economics. But anyway, so

Unknown Speaker  6:17  
Theory of Constraints has many tools. So it has the five focusing steps. It has the current reality tree, or future reality tree. So the one I picked for this paper, which actually the paper is based on a book I wrote last year, is the current reality tree. So the whole point of the current current reality tree is for you to list all all what we would call problems, but in reality is undesirable effects. And this is a thing in theory constraints. As you have a system and you need to understand the system. What you want to understand is, what is the core problem, or the constraints of the system. And all the rest are just just undesirable effects of that a fundamental constraint, or fundamental core problem. So the way I can I can, or I started working was okay, let's start listing all the undesirable effects that we see in our daily life dealing with economics. And so the starting point is to list those set of symptoms. And then well, the end result, if we're able to find the causality between each of those symptoms should be the core problem. And that's where we need to focus everyone to find a solution. And that is called worth trying to propose a direction of the solution. So what I did was to list what we see day in day out. I mean, what do we say in the in the economy as it's run by all the states, all the governments, we see bailouts, we see the bank loans, creating money basically, out of thin air, we see a reduction in capitalization rates. We see misallocation of capital, depletion of natural resources, corruption, erosion of institutionality, we see inflation. We've seen stability, injustice, less freedom, no hard money. I mean, so I listed all of this. And when you try to go about a finding the cause and effects a for each of these, or trying to tie them together to see what causes what the core problem that I found, which actually is just and that's why I call it an independent verification of Austrian economics, which is something that the Austrian economists have already said, is, look, the issue is that we don't have a hard money. So the money is a state owned. And because of that, you cannot actually save the fruits of your honest work. And without that, you are changing people's time preference. Also, because money is state owned, well, the government can decide who you transact with or not. They can decide the interest rate, they can always print more money they can, they can create out of nothing in order to finance Well, anything or everything that needs to be finance. And also each intervention that the government does, as you see it in that current reality tree only causes further issues, further troubles further problems. So what's the direction of the solution? If we understand that that's the core problem that money's state owned? Well, the direction of the solution in my opinion is to assign property rights. So the only way that you can get hard money is that you assign the property rights to that hard money, meaning that it cannot be seized, it cannot be taken away from you. And you can actually keep the honest fruit of your work. And while the solution is already available, it exists. Opinion is Bitcoin, it's decentralized, it can be a reserve of value, you can carry it anywhere, you can transfer it almost instantaneously. So I think that base approach of using TOC

Unknown Speaker  10:41  
it's, it's beneficial, because it's a way of understanding the system dynamics. And again, toc is nothing more than system dynamics, understanding the system, understanding how it works. And then because you understand how it works, well, why should you focus all your, all your effort if you want to make a change. So in a nutshell, that's basically what the book is about, and what the paper is about. And about the paper, well, I want to make a contribution to the body of knowledge of the OSI. So this is a draft a, so I'm working on it, I have received both a positive feedback, but also received some very hard harsh critiques. But all the criticism that I received a, I'm always I always review that that criticism, and is because there is no actual understanding of Austrian economics. And people have, I mean, they are more like in the living in the condition world, if you like, rather than on a proper review of what human action is, which is I mean, for me, the economy as is not nothing, not more than or it is the human action. And it's your is the is the preference of each individual. It's about those, those social cooperation of people do specialize in what they do. And of course, it only works if you can guarantee private property. And of course, your first private property is your life. Also, if there is equal treatment under the law, I mean, those are fundamental things that we need to have for, we want to continue progress. And maybe just a bit of context about the book, the book is more, it's also about explaining where we come from, as civilization as a civilization. Because usually people are saying, well, times are bad, everything is going wrong. But if you go 200 years ago, I mean, life was really bad. And if we go 1000 years ago, it was, it was miserable. So it is about understanding where we come from, what has been the basic or fundamental things that happened 200 years ago, that enable humanity to become richer, wealthier, and not just about money, because you can measure it in longevity, health. I mean, those are things that have improved tremendously in the past 200 years, 100 years, 50 years. But what has been the underlying causes for that to happen? Well, again, that some people were able to preserve the fruit of their honor on his work, they were able to invest that they were able to save, they were able to keep a dare initiative in order to produce more goods, more services at a better price for all the other people and of course, trading with each other in order to do to get where we are. So that's basically it.

Brian Nichols  14:16  
That's basically it. Why I wrote down a lot of notes there, so don't worry, I've been like keeping up. Here's the common school. So the one thing I circled, and I hear a lot of similarities, especially in the world of sales, and obviously we bridge the world here right with The Brian Nichols Show, we talk about bringing the world of sales and marketing to the world of politics, focusing on what not winning arguments, but winning hearts and minds. And we do that by focusing on what are people's core problems? We start off by asking questions, figuring out really peeling back that onion, what is the core issue that is driving the person to be in whatever situation that they're in whatever problem they are facing, and then to be able to build that solution, but it's in I always use the analogy. It's like going to the doctor's your doctor doesn't go in and you say, Okay, I'm sick. And here's what's wrong and they just give you a pill. Now they're going to ask you some questions, they're going to ask those questions to figure out what specifically what symptoms you're experiencing, and maybe what's causing those symptoms so they can have a better diagnosis. And that's what you're doing here, then that's frankly, what we need to have done, when it comes to actually talking about economics and bringing it to the real world. And you started off. And you mentioned this, making it simple. And I talked about this all the time. I'm in the world of technology sales, that's why I was late for our call today, I have a call when they're over. And you know, one of the most difficult things is taking oftentimes very complex cybersecurity solutions or complex business continuity solutions, and making them easy to understand for your average person. Because unfortunately, a lot of the folks that I'm speaking to they it's a one or two shop person, house for it, you know, one guy, he's going to be focusing more on the strategic, the other guy is more on the operational, but you know, neither is maybe a cybersecurity Pro. So it's being able to take this and make it simple. And show not only why it makes more sense to talk about it with us, but then to show how we can help make them have a better future, build that real reality and make it real. And one of the things that you brought up here, and as I was going through and reading your paper here, the the overarching theme, that seems to be the best, the best news we can look forward to is the reason we've seen the advancement of right now freedom. And really, this is the culmination of technology and the fact that we have Bitcoin as the means to really get away from this Fiat government money. That's been the ultimate almost, you know, launching off point to have now this become almost a reality where before it was more well, this could be nice. If we can have some form of private money now it's there. And now, to your point, it's all because of the technology advancing. Where else can this go? And that's that's the thing. I think we as a, you know, a group of liberty lovers out there, we can start to build the conversation on the offensive. You know, this is where we are today. 2022 The technology is advancing exponentially. What's it going to do to help us advance freedom across the board with technologies we don't even know exist yet?

Unknown Speaker  17:12  
Absolutely. So I think you're spot on. I mean, this has been possible. With the technology, technological advances. And technological advances are core only, again, if we are able to free people to take the endeavors that they need to take. And those are never in there. I mean, freedom, liberty, at the end of the day is just one side of account of a coin, that on the other side has accountability. So you're free, but you're accountable of the decisions and the consequences of those decisions. And that that's, that's what I think intrapreneurs and people that take initiative do understand very well. They do take the risk, they measure the benefits, but they carry the costs if things don't go well, but thanks to them is that we have been a improving technology to a place where actually now you can have a reserve of value that goes in your pocket. So who would have thought about that? I mean, 20 years ago? I mean, yeah, some people were thinking of it, but they have they have not yet realized that. So yeah, technology is fundamental. And the only way to keep improving technology is by A is worth making sure that the incentive for people to create, develop, and keep and make that technology available. Is there. So if the incentive is not there? Well, it's going to be quite tricky. Or yet close to impossible, that we'll see a technological, technological advances. Yep.

Brian Nichols  19:00  
Well, and that's why, you know, we see folks out there like Elon Musk. And there's a reason he's not only the richest man in the world, but probably one of the most popular or at least, the most hated, I guess, because he is the most popular people in the world. And he's been able to do that, because he's been able to amass technological advancements for society. I mean, Tesla and SpaceX alone, they're going to be massive in terms of their impact on humanity and the other projects he's working on behind the scenes. Oh, and by the way, he's talking about trying to buy Twitter, you know, that that whole conversation now you're seeing there is, you know, the desire to use the technology to advance us forward. But to your point, it only goes to the extent when we actually have a means that people see the value in making that investment. And I think you talked about the people who we should be targeting and that's, frankly, why we took a hard turn here at The Brian Nichols Show to start talking more to business owners, entrepreneurs, because those are the people who are our natural target market. Those are The people who we can speak to and communicate with because they're speaking our language I had on the program that gentleman's name is escaping me at the top of my head right now. But it was the for Austrian School of Economics Mises Institute, it was economics for business. And it was a great conversation, because what they're doing is giving business owners a real tangible playbook that they can take forward in trying to build their companies build their, their businesses. And with that, it's all based on Austrian economics. So that's that, by the way, is a great episode, folks, go check that out over at Brian Nichols. show.com. But with that being said, you know, I think we are seeing right now that there is a renewed interest in talking about economics, especially when the world's on fire and we just printed rose at 6.5 Something trillion dollars of the past two years. So people are waking up to inflation and economic realities being a thing. And now I think it's better, no better time than now to go ahead and present our alternative. And with that being said yet, yeah, you mentioned it, you have a book, it was the Theory of Constraints, I'm sorry, the theory of constraint economics, reality, freedom and progress. And that's available over on Amazon right now. Where Can folks beyond that, if they want to learn more, continue the conversation with you. But also, obviously, check out theory of constraint economics.

Unknown Speaker  21:14  
Thanks. Yes. So the book is the expansion of the paper. So I just want to mention a couple of things. So where do I see us in the future? Well, I'm the only thing I would say about the future because nobody knows how what the future would be. But what I would say is that if we are able to make sure that people can preserve so that money is privately owned, so that it gets a the property rights for the fruit of the honest work of anybody, those property rights can be assigned to that person. And we have that real hard money. And also, hopefully, at some point, real hard real estate, then the future, I can tell you is going to be much better than we can imagine. I don't know how what's going to be, but it's going to be much better than we can imagine. And to the point of inflation, if you think about it, if the government had to reduce taxes in the same proportion, as the government generates inflation, well, the taxes would be minus infinity by now. So inflation, I think, is the the harshest tax that we have to endure. And especially because and also, it is really hard on the people that have less, because that affects the people that have less the most, because they're the ones that are less protected against any variation of the prices. And usually what we hear about inflation is that inflation is has many causes. But if that were true, well, they would need to prove that you can have inflation in a barter economy. And I think that nobody can prove that. So just to keep in mind, when somebody tells you that inflation has many causes, well, not really, Friedman said, inflation is always an everywhere, the consequence of increasing the money supply.

Brian Nichols  23:20  
We're filling it now. Seeing it where at the grocery store and at the gas pump to places you really can't escape it. All right, Jorge, unfortunately, we are already hard pressed here for time. So if folks want to go ahead and continue the conversation, we're going to go ahead and do that. Thank you know, we're gonna go ahead and end the conversation with you if they want to go ahead and get in touch.

So where can folks go ahead and get in touch with you if you wanted to go ahead.

Unknown Speaker  23:53  
Apologies. I thought it was they were going to get in touch right now. So I was waiting for the questions. So well, if they want to write, to me, my email is j dot g o n zero n@hotmail.com. Also, well, as you mentioned, my book is in Amazon theory, theory constrains economics. So if you want to give it a read any feedback very, very much appreciate it. So yep, just let's keep the conversation open. I'm always quite looking forward to discussing these subjects with anyone. If somebody wants to learn about theory constraints. I can also point to you about some very interesting books.

Brian Nichols  24:42  
There you go. All right, folks. What we'll do is we'll include those links in the show notes make it super easy for you. I do hit the artwork at your podcast catcher, it'll bring you right to Brian Nichols. show.com, where you can find today's episode, the entire transcript of today's episode. Yes, all those links we mentioned Plus, you can find the book theory of a constraint economics reality, freedom and progress, please go ahead and give it a a purchase when you do go ahead, let Jorge know that Brian Nichols sent you there. And by the way, folks, if you enjoyed the episode, please do me a favor, go ahead and give it a share. And when you do, go ahead and give me a tag at B nickels liberty. Well, with that being said, folks, it's Brian Nichols a signing off. You're on The Brian Nichols Show for Jorge Gonzalez more. We'll see you tomorrow.

Unknown Speaker  25:25  
Thank you, Brian. Appreciate it.

Unknown Speaker  25:26  
Bye

Transcribed by https://otter.ai

Jorge Gonzalez Moore

Theory of Constraints Economics: Reality, Freedom and Progress

Industrial Engineer, MBA with Contracting and PSCM emphasis, MSc Austrian Economics.

24 years of experience leading projects in areas such as Contracting, Procurement and Supply Chain Management offshore and onshore (category management, contracting and procurement, materials management, and logistics), Oil & Gas sales and business development and Local Content, Corporate and Community affairs.

I have led and implemented Contracting and PSCM strategies and commercial projects of hydrocarbon sales, leading other O&G companies, both state-owned and private, as well as continuous improvement projects using Theory of Constraints and 6 sigma methodology.

Ample experience as supplier manager and in contract engineering and negotiation.