The general theory of not-enougness: We have skewed demand and not enough supply. When thinking about supply, you have to think about the inputs. For example, think about what it takes to buy an apple at the grocery store:
- Apple seed goes to farm, farmer farms apple tree, apple gets picked from tree, apple gets loaded into truck, truck drives to warehouse, warehouse drives to grocery store, apple gets unloaded, you pick up apple, you walk to cash register, you buy apple, you drive home.
That’s a LOT.
Imagine that apple process x n^100000 and that’s what supply chains are like. There are so many opportunities for things to go wrong, and thus, they often do (especially when you have exogenous shocks like a global pandemic).
If all the sudden the trucks stop delivering to the stores, you can no longer purchase your apple. Bad! And that’s kind of what’s going on right now:
- The thing theory: People are demanding things but there aren’t enough things to produce the things (labor, machinery, trucks etc). And that compounds as people demand MORE things.
- This works until it doesn’t