How can the stock market hit new highs at the same time unemployment is
hitting new highs? Simple. The market is up because corporate earnings
are up. Corporate earnings are up because companies are cutting costs.
And the biggest single cost they’re cutting is their payrolls. So they
let people go and, presto, their balance sheets look better and their
stock prices rise.
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The result, overall, is an asset-based recovery, not a Main Street
recovery. Yes, the economy is growing again, but the surge in
productivity is a mirage. Worker output per hour is skyrocketing
because companies are generating almost as much output with fewer
workers and fewer hours.
The Fed, meanwhile, has become an
enabler to all this, making it as cheap as possible for companies to
axe their employees. Money costs so little these days it’s easy to
substitute capital for labor. It’s also easy to buy up foreign assets
with cheap American money. And it’s now blissfully easy for Wall Street
to borrow money almost free and buy all sorts of interests in foreign
assets, especially commodities. That's why we're seeing the prices of
foreign commodities and other assets go through the roof.
---
Where is this heading? No place good. Without a major shift in policy
- both at the Fed and in the White House - the economics point to a
big stock-market correction and a double dip. The politics point to
substantial losses for Democrats next year.
Business
12/16/2009
The Great Disconnect Between Stocks and Jobs
12/14/2009
Creating Social Reality: Organizations as Cultures
This is Chapter 5 of Images of Organization, the Executive Edition. It is really saying something, as you will see. From page 136 Culture Change and Core Values:
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The total quality and customer service movements that dominated managerial thinking and practice in the 1980s and 1990s sought to create a culture change in management at large. The various theories and techniques advocated by these groups offered new mindsets and new values for doing business, backed by a detailed "language" and protocol though which organizational members could begin to think, talk, and act in new ways. Their implicit aims were to create a kind of "cultural revolution" that would replace the old bureaucratic way of life with a focus on a new "customer and quality driven" business logic.
To the extent that the new cultural values were able to replace the bureaucratic ones, initiatives spawned by these movements were extremely successful...But as many as 70 percent of the firms that set off on this new path were unsuccessful, largely because they failed to replace the bureaucratic logic governing the old mode of operation. Their quality and service programs became no more than programs. Despite all the money and effort that was spent, they failed to dent the dominant culture and the political dynamic that often supports it.
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I saw this happening in one of the last companies I worked for: Adaptec. It knew it was in trouble and decided to re-invent itself. It hired a consultant that claimed to have a sure-fire way of doing this. Many high-level meetings were held, which people seemed to enjoy, and lots of wheels spun needlessly. The result: nothing, and Adaptec faded away.
Products that Sell Themselves Automatically
What are the hottest new products? Facebook and Twitter. You may object that they aren't products, but some kind of strange new service - but that is making an artificial distinction. They are getting all kinds of people to join them - and in the process are making all kinds of money.
All those precious eye-balls looking at their site can be easily diverted into looking at advertisers - which is really where it's at. It's no different than looking at a newspaper - except it is free - the main gotcha. People can easily be suckered into a freebie - not realizing that they are giving away themselves - for free.
These services have one objective: to take over your life - and they are succeeding admirably.
You may simply reply that they are only providing what people want - so what can be wrong with that? The same could be said for drug dealers - they are giving people what they want - very badly. In either case, the results are not good - and the results are what count: they teach people to be helpless consumers: slurping up the latest stuff.
Not all are this way, it is true. There are some sharp people out there, also using the latest stuff. But they know what is going on, and use it - instead of letting it use them. But they are an exception.
Myself, I am scared of them and give them a wide berth. I get frequent notices that so-and-so is now following me on Twitter, but I ignore them. That is another world, one I do not want to inhabit.
I am not a twit.
12/12/2009
Mozilla Takes a Dig at Google
Mozilla is the open-source company that gave us the Firefox browser, the one that I use and recommend. Mozilla has a long history, which I just brushed up on using Wikepedia, being curious myself. But for our purposes here, just consider it the Firefox company. Even after reading about it on Wikipedia, I have no idea how it makes its money or stays in business. Suffice it to say that it exists, and it is influential in the software world, where prestige means a lot.
The relationship between Mozilla and Google has never been clear. Google is a strong supporter of open source software, has some of the best brains in the business, but also has keen business instincts. Initially, they were in bed together, let's put it that way. But lately, as in many love affairs, the relationship has soured. Especially when Google introduced its own browser, Chrome. Evidently, Google no longer includes Mozilla in its business plans - which are, briefly, to take the software market away from Microsoft.
Recently, the head of Mozilla, Asa Doltzler, fired a shot over Google's bow, urging their users to use the Microsoft's Bing search engine - because it has better privacy provisions. This is a sticky issue, but I suspect he is right.
Will I switch? No. Using Google is too easy for me, even tho I do not like their privacy policies. Mozilla is doing us a favor by helping to keep Google in line - and we do need protection from the newest bully on the block.
Who Controls America?
In short, whoever controls the money controls everything - and that is the Business System, especially the Financial Industry. It is foolish to talk of The People controlling the economy, the government, or anything else. They have become mere consumers, content to vote once in a while, and used to taking orders from those above them.
The economy could be mapped as merely the flow of money: where it is, and how it moves around: an economic census. This doesn't seem like such a impossible job, but instead the economists concentrate on various indicators, as if these represented the economy itself. Perhaps a basic analysis hasn't been done because it would reveal too much about the Power Structure, which prefers to remain hidden. The people must continue to believe they are in control - when they clearly aren't.
12/10/2009
Images of Organization
This book by Gareth Morgan is my latest reading project. I have copied part of the Introduction below:
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Organizations are many things at once!
They are complex and multifaceted.
They are paradoxical.
That's why the challenges facing managers and practitioners are often so difficult.
While managing and organizing are challenging in the best of times, the difficulties are compounding in today's environment of rapid change. If you want to be the type of leader or professional who helps your organization adapt to the multiple demands of an increasingly turbulent world, you need to become aware of the images and assumptions that are shaping your current thinking and develop the capacity to use new ones. You need to develop competencies that allow you to see, understand, and shape situations in new ways.
This is the focus of Images of Organization.
It is not a "quick fix" book.
It is not a book that offers a simple recipe to tackling organizational problems.
Rather, it is something I hope you will find far more valuable: a resource that will help you challenge and transform your thinking about organization and management - a resource that you will want to visit time and again.
At first glance, Images may seem to be a very complex book because it embraces so many different management perspectives.
But the basic thesis underlying the book is very simple: that all organization and management theory and practice is based on images, or metaphors, that lead us to understand in powerful yet partial ways. When we realize this, we learn to recognize that our favored ways of managing and organizing often lead us to miss out on other ways of managing and organizing. In addition, we recognize that since every metaphor has limitations as well as strengths, we must be aware of the inherent blind spots that inevitably undermine our effectiveness.
To achieve greater effectiveness, managers must become skilled in identifying and using different approaches to organization and management. In Images terminology, they must become skilled at "reading" organizations from different perspectives and at developing action strategies that are consistent with the insights they glean. Some perspectives and insights may complement others. Some may contradict. When we master the art of working with these parallels an contradictions, we increase our peripheral vision, creating the flexibility needed to to identify difficult organizational issues and to respond with appropriate strategies for change.
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Very good!
Are managers of real companies interested in any of this? In my experience: some of them, and I always tried to find these managers. But my in twenty years working in software development in California, these seemed to get fewer and fewer - and the good ones usually got screwed.
My exposure to gringo companies in this area convinces me that this pattern has continued.
12/06/2009
How Important is Small Business in America?
My instinctive answer to this question is: absolute zero. The importance of an industry can be rated by the number of lobbyists it has in Washington, and by that yardstick, small business doesn't even qualify as an industry - it's more of a cottage industry, important only to the people involved: a few here, and a few there. In contemporary America bigness is everything, and smallness is doomed.
Let me start with the beginning: I grew up in a small business world. My father was a small businessman, and the little town we lived in, Nauvoo, Illinois, was full of small businesses, mostly family farms, many of them consisting of only a few acres growing fruit or vegetables: truck farming. Main street was lined with small businesses: mom and pop grocery stores, a hardware store, a newspaper, a small department store, a drug store, filling stations, a garage, a barber shop, a jewelry store, a doctor's office. None of these small businesses, except for the drug store, still exist. That world, the world of my childhood, is gone.
My father's home town, Ft. Madison, Iowa, where I was born, was only ten miles away, did have some industry. It had the Sheaffer Pen Company, which you can read about here, on Wikipedia - and, in the West End, where Dad came from, the Santa Fe railroad, which was a very big thing in its day. There was also a paper mill, which used to create a huge stink whenever it opened its vats, and the Anthes Fork and Hoe, which manufactured hand tools. None of these businesses still exist. Or the Ft. Madison Feed and Seed company, which was owned by my Uncle Walter, or the hardware store which was owned by several families who were close to my family. Or my father's business, the Smith Studio. All gone. It is now part of the Rust Belt of America.
When we graduated from high school, we knew there were no jobs for us in the home area. A few did stay, and started their own businesses: a farm (which they inherited), a bookkeeping business, a construction company. But anyone with ambition moved on - and only went back to the home town occasionally, for a visit, for sentimental reasons.
I went to the Engineering School at the University of Illinois, graduated as an Electrical Engineer, and went to work for the Federal Aviation Agency, as a field engineer, installing aircraft navigation, communication, and radar systems, working out of Kansas City, all over the Middle West. But I didn't stay there long: I moved to the East Coast, and had a number of jobs in the New York City - Washington D.C. corridor - where the good jobs were - mostly involved in the Cold War.
This high-tech world was entirely a big-business thing. You had to be big to operate in that arena - with big contacts. Those of us working there were as small and powerless as people could be, and with the skills to match - but that was exactly what was wanted: warm bodies, and not much else. Those who were ambitious, moved up to middle management, and satisfied their ambitions. However, in old age many of these are now pitiful characters, with little to show for themselves. And a few have even ended their lives.
I see I have digressed into a personal history and a history of high-tech America during the Cold War - not what I started out to do. Let me return to the subject: small business in America. You can tell by my history that I left the small business world far behind, along with most other Americans, ended up in Silicon Valley, and forgot all about it. Silicon Valley, by the way, was once a beautiful agricultural area, and San Jose, I have been told, was once the nicest little town you could imagine. Now, along with most of California, it is a total disaster. Growth and Development, of which California is our finest example, has become a black hole - but let that go. I want to give you my Google findings about small business.The Small Business Adminstration
This puts small business in the best possible light:
Small firms:• Represent 99.7 percent of all employer firms.
• Employ just over half of all private sector employees.
• Pay 44 percent of total U.S. private payroll.
• Have generated 64 percent of net new jobs over the past 15 years.
• Create more than half of the nonfarm private gross domestic product (GDP).
• Hire 40 percent of high tech workers (such as scientists, engineers, and computer programmers).
• Are 52 percent home-based and 2 percent franchises.
• Made up 97.3 percent of all identified exporters and produced 30.2 percent of the known export value in FY 2007.
• Produce 13 times more patents per employee than large patenting firms; these patents are twice as likely as large firm patents to be among the one percent most cited.
I question one item: that it hires so many high-tech workers. I was in the high-tech job market all my working life, and in that market the the only jobs I knew of in small business you got from knowing somebody else who was starting a company. A few of these made it big, (such as Google) but most ended in total exhaustion.
Examiner.comThis article explains how small business is at a disadvantage in a recession, where government recovery efforts are concentrated on big business - usually very big business - usually the financial industry - because these cannot be allowed to fail.
Small Business Entrepreneurs
An interesting article about the differences. For example, to be a successful businessperson (of any size) you have to be able to get along easily with all kinds of people - not my strength.
And finally: Small Business in Wikipedia.
As, usual, an excellent source. Anybody with any sense uses it, but teachers, perhaps because they feel threatened by it, disparage it.
12/04/2009
Control of the Job Market
Everybody has to have a job, with very few exceptions. And this means fitting into some kind of organization - usually a fairly large one - and usually a corporation with little interest in its employees, its customers - or anything else. The corporations control the government that is supposed to control them - and get very huffy if anyone suggests the opposite. They are not interested in an economic recovery that will reduce unemployment, because this keeps them in control of the job market - and therefore everybody else.
11/17/2009
Conflicts Between Upper Management and Middle Management
I got the idea for this from Venkatesh Rao, who operates the ribbonfarm blog: experiments in refactored perception, and who has been discussing The Gervais Principle, based on the TV show The Office.
Basically, he divides office personalities into three types: the Sociopaths at the top, the Clueless in the middle, and the Losers at the bottom. As you can see, not very flattering titles - but apt ones. I have put my own slant on his slant in what follows.
As I see it, the Sociopaths create and destroy companies - more often the later. The Clueless are the geniuses in the middle that help with the creation part, and try to resist the destruction part - as the sociopaths try to make a quick buck off of what they already have, instead of trying to make it better. For this posting, I have simply called them Upper Management and Middle Management.
The Clueless, or Middle Management, were once over-achieving nobodies, who got promoted, because they were so useful. They are called clueless because they have no understanding of power politics, which the Sociopaths, or Upper Management, excel at.
The Losers, the vast majority, simply do their job, more or less, and try to make the best of a bad deal. I was one myself once, but I will not be spending much time on them - after all, they are losers.
I haven't spent much time around the Sociopaths, but my limited exposure to them certainly convinced me of the aptness of their title. You want to say out of the way of these guys.
I have had more exposure to the Clueless, and I have worked for several of them. The companies I worked for owed much of their success to these guys, who were brilliant and hard-working - but they always fucked them over - if you will excuse my French. The Clueless never realized, or never admitted, that they had been had. That is why they are Clueless.
Power and the People
This is another in my series about power. I am convinced that it is a key issue - something I should have realized long ago when I was stumbling around, trying to make a living. In that world, power is everything. I had been brought up to believe that righteousness was everything, which was no help to me in the business world.
Since then, in the conflict between power and the people, power has won - but the people have not noticed, and the situation continues to get worse. In my last posting Where has Power Gone?, I pointed out that power in post-modern America resides in the Power Complex, a loose arrangement of large organizations, centered around the large corporations. This seems obvious to me, but as far as I know, no one else has picked up on the idea. Why?
Power has been around as long as the human race has been in existence. Complex is not as intuitive; science is just beginning to study complex systems. But the basic idea is simple: once power crosses a threshold, it automatically becomes more powerful - and more invisible. Power had been increasing and became more concentrated in the late 1800s and early 1900s as manufacturing (or industry) became more and more important.
But this power was highly visible, and a strong reaction to it formed in the government, with anti-trust legislation, and in the workers, with the formation of unions.
In the last half of the 20th Century, this situation changed. Power (note the capital P) became all-powerful and invisible. The people and their government became powerless beside it. Something like this had never happened before - not to this degree. What had happened?
First of all, our technologies had changed - the most important one being television. This gave the corporations more control over the people, since they owned the television networks - but this control was in the background, was invisible and was subtle. TV encouraged the populace to buy more and more things - but also to allow the control of their lives by outside forces. They had no idea what these were, but they knew they were out there, were powerful, in control of their televisions, and therefore of their lives. The battle for control of their lives had been won without anyone firing a shot. And without anyone noticing.
Next, computers gave the corporations even more power. They became the ideal employees: they never tired, never complained; and did what they were told. True, they required special people to run them, as I did for awhile, and these people cost money, but as software matured less expensive people could do the job. The effect technology has always had.
Finally, the Internet, the final blow. Now businesses could extend their control globally - and they promptly did so. Now they had no need of the government, which tended to favor the people, so they decided to get rid of it. At least this what happened in the US.
In China, the government remained in control. As a result, China is quickly becoming the world's strongest power. See the NIC 2025 project (a government report) for details on this.
Meanwhile, back in America, people are wondering what happened to them - and turning to totalitarianism for an answer.