Sunday, June 10, 2007

Forget the Alien

An interesting post by Lance Mannion built around the threat that Rupert Murdoch might buy the Wall Street Journal. I don't care so much about that (what, is he going to make the WSJ more blindly pro-Big Business?), but Lance makes some interesting points about business along the way.

Most newspapers these days are run by the same type of business school grads who have done such a bang up job with every other industry in America.

What industry in America, you ask?


The basic premise of the school of scientific management (Can you believe they really used to call it that? Back in the 50s everything had to be a science.) is that it doesn't matter what different businesses appear to be manufacturing, producing, and selling; in reality they are all meant to be producing the same thing. PROFITS!

Didn't matter that this company seemed to make widgets and that company seemed to make paper towels and the one over the there seemed to be making shoes while the one back over here seemed to be making cars. They were all making PROFITS. At least they ought to be. And since they were all actually producing the same thing, the process for producing it didn't have to vary from company to company. They could all be run the same way.

Over time PROFITS came to be defined not as money in the company's bank account but gobs and gobs and gobs of money in the stockholders' portfolios and trust funds, more and bigger gobs every year---PROFIT isn't the money left over after you've paid the bills. PROFIT is an increase over the amount of money you made last year, so that it came to be thought that if you had a million and two dollars left over after you paid your bills last year, but you only had a million and one left over this year, you'd lost money.

More and bigger gobs of money have to be made every year.

And since it was discovered that stockholders don't actually know how to count high enough to keep track of the gobs and gobs of money they make (or lose), they are dependent on and very grateful to the people who promise to keep track of it for them, their senior managers, and they are happy to reward them with gobs and gobs of money.

Naturally, the senior management types began to take these gobs of money for granted. They started thinking that the point of it all was the gobs of money. That's what the businesses they ran did. Put money in their pockets. A company didn't make cars or shoes or widgets or paper towels. It didn't even make PROFITS anymore. It made management rich.

I say they thought this way. It wasn't, and isn't, so much a thought as feeling. And they have been well-trained in business school-speak so that they have all these words, mostly nonsense words, layers and layers of nonsense, they can marshal to get between what they "think" and what they actually feel so they never have to articulate to themselves what they are up to.

At any rate, the business of America became the business of keeping a certain power tie-wearing elite rolling in it.

With the raking in of dough becoming the defining principle of any and every industry, senior management went insane in their thinking about how money is made and how it works.

Now you don't need an MBA to know that you can't make money without spending money.

This stubborn fact is what has driven the management types out of their skulls. As far as they're concerned, every dollar they have to spend is a dollar they didn't make and every dollar they don't make is a dollar they lost.

There has to be a way of making that dollar back, they cried to the heavens. God, show us the way!

Then they thought, there has to have been a way that would have saved us from having had to spend that dollar at all.

What is it we spend so many dollars on?

They looked around them and they saw that, lo and behold, the thing a company spends the most dollars on is... the company.

It costs a lot of money to just house the company. There are rents to meet, mortgages to keep up, loans to pay down. You have to pay to light and heat and cool your offices, factories, and warehouses. Your trucks and machinery need fuel. You have to pay for the raw materials to make whatever it is besides PROFITS you're supposed to be making.

The main enemy of a company's making all the gobs and gobs of money its stockholders and managers expect to make is the company itself.

Ideally, then, it would be great if you could make money without actually spending it, which is to say it would be great if you could run a company without actually having to produce anything but money.

Enron came closest to realizing this dream.

But it is a dream. You have to pay your overhead, you have to pay for your raw materials. You have to pay people to do the work.

Those people...

They're the real expense.

Damn them! Don't they realize how much money they're costing us with their greedy demands to be paid for the work they do?

This sense of agrievement wasn't invented in the business schools. Labor has been despised by the owner class and their flunkies since ancient times. In the good old days, the owner class dealt with the problem by turning the workers into slaves.

Some modern day management and owner types still think of this an option.

Some day, they dream wistfully.

In the meantime, what we have is an economy run by people who fervently believe that it must be possible to run a business and make PROFITS without having to pay overhead, without having to pay salaries, without having to have to pay for materials and fuel---which is to say that they are looking for a way to run a company without having the expense of an actual company to run.

They hate having to make anything but PROFITS.

These types are now running the newspaper business.

And they hate newspapers.

They cost money to publish.

There has to be a way to make money out of running a newspaper without having to suffer the horrible indignity of having to actually publish a newspaper.

Publishing in their minds means the same as manufacturing meant in the minds of their fathers' generation of management types: Spending money that ought to be going into their own pockets.

Cut costs, maximize PROFITS!

The biggest costs at a newspaper, as in any business, are salaries and benefits, and the people making the most money and taking home the largest benefits are, after management, who don't count, money spent on managers is play money, the reporters and editors.

Get rid of them and just think how much money you could stuff into much money you could save the company!

Newspapers really are in trouble. Big trouble. Not enough people are reading them. Advertisers are giving up on them. They do cost a lot to publish. Papers are folding right and left. Few new ones are being founded to take their place. Management has to do something. (I'm not going to get into here the ways management itself contributes to the problem or how their solutions tend to worsen the problems, except to say that because they don't see newspapers as anything but a means to PROFITS they don't know or care what makes them a viable product. They don't know what readers want to read. They don't even know how to sell them crap.) Unfortunately, what they've mostly chosen to do is what they learned in business school works for every business that needs to make more money.

Cut costs.

They say they have no choice. They probably believe it. They're doing what they need to do to save their newspapers. So they tell themselves. What they're doing is again what they learned in business school. Cutting costs reassures stockholders and potential stockholders. It tells them you are serious about making PROFITS. The stockholders are glad to know this about you and they reward you for your seriousness with more gobs of money. The management type sympathetically helping his old editor friend carry his things out to the car is making more money for himself every step of the way.

Editors and reporters need to go because they cost the paper the most money. Of course they are the main producers of the thing the paper supposedly sells, news. Without them you have nothing to put in your newspaper, which is to say you have no newspaper. You would think then that management who downsizes too much of its news staff would find itself in the position of an automaker who after watching all his spot welders leave the factory for the last time turns around and confronts a dead assembly line full of car parts that aren't going to weld themselves together.


That car maker isn't thinking he can't make any more cars. He's thinking, ROBOTS! He's thinking outsourcing. He's thinking of desperate third world spot welders who will build him his cars for practically nothing a day. He's thinking slavery, although he doesn't know it because he won't let himself use the word. He's thinking, or he would think if he had the vocabulary and the honesty, let's move the whole darn shooting match overseas where I won't have to look at it and can almost imagine that we're not actually manufacturing anything except PROFITS.

And because the scientific management types who run newspapers are exactly the same scientific management types who ran the auto industry into the ground here, they're also thinking, ROBOTS! They're thinking outsourcing. They're thinking, there's got to be a way to move the whole darn shooting match overseas!

Of course this is insane and they know they're not insane so they can't be thinking this way. But they are. And they are insane. That's what greed and a thorough education in how to divorce reality from wish-fulfillment fantasy will do to you. We all know that you can't outsource the coverage of the local news. We know that there isn't a robot yet that can cover the county fair. They don't. In their heart of hearts they believe that it should be possible to gather and publish news without having to pay anybody to do it or pay them very much.

There's a lot here, and I'll let most of it stand for now. But the point is clear that U.S. business is not much interested in doing business. Instead, they want to reduce most relationships to contract compliance.

The ideal business model for today is to have a CEO, sitting in a palatial office, a few personal factotums to make reservations and pick up cleaning, a few flunkies with impressive titles who will get up in the middle of the night to talk to the subcontractors overseas, and a stable of lawyers to ensure compliance with contractors. This allows all revenues over the lowest possible costs to funnel into CEO compensation and investor-friendly profits.

This is not a long-term business model that can succeed, but it's what we're moving to.

Friday, June 8, 2007

Historical Accident, or Purposeful Intent?

Has anyone ever wondered why some things are tied to businesses, and others are left in the hands of individuals or government?

In Illinois, we're going through the periodic public transportation crisis, with threats of route shutdowns and service truncation. The agencies need more money from the government, and they need it now.

At the same time, like everyone else, we're reaching a crisis point in health care, with 15% of the population uninsured and many more under-insured. There's even talk of a national health care plan, in addition to the bizarrely populist plans advanced by the governor of Illinois (to be financed by magic).

But health care is tied to business. Ever tried to buy health insurance without a job? Expect to pay a lot and be covered a little.

Transportation, on the other hand, is not. Though one would think that employees being able to get to their jobs is at least as valuable as their health, business seems to have nothing to contribute (other than, in a very small number of cases, a pre-tax train pass program).

I understand that business took on health care as a benefit to attract employees, and that it was convenient to house it there due to risk pooling (even though this doesn't make as much sense for small business), but why is that so diametrically opposed to their interest in transportation issues? They seem very similar, so is this just a historical accident?
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