What's Wrong With American Business Culture And The Economy?

[Ideologue]

I think you're misinterpreting his goals, or the way he defined success.

Whatever his goals were, or however he defined success, giving people money so that they could (maybe) buy your products is not a transferable lesson.  I don't argue that money in common people's pockets may be more beneficial to society and economy than money in corporate vaults, but it would not be more beneficial to the corporation owning that vault. 

You can't structure society by expecting entities to act against their self-interest;  you instead have to align the incentives for the entities and the entire society.  The fact that some entities did choose to act against their self-interest in the past, out of ignorance or out of lack of competition, does not change that pretty basic conclusion in economics.

I got no idea what fahdiz' beef is with this analysis.

I think it's possibly because he still believes there's some sort of free market solution to our troubles, as defined as gross inequality and wage stagnation, which there obviously isn't.  Even Yi would probably concede that.  But fahdiz is (perhaps) trapped between the rock of wanting to believe in America and the hard place of America sucks.

[Ideologue]

For what it's worth, I think treating employees as stakeholders is just good business.  There are intangible, but real monetary benefits towards having a workforce that's happy, secure, empowered, and planning to stick around for the long term.  However, I'm having trouble seeing why it has to be legally mandated, rather than just be a talent management decision of the agents of shareholders.

I got beef with this one though: it's because of the reserve army of labor, even "talented" labor.  The biological and social necessities of that army outweigh the benefits of a happy workforce.  And once you're dealing with unskilled labor, people are totally fungible.

[Zanza]

So the employee reps can never prevail unless the shareholder reps disagree.

Sometimes the corporate charter or bylaws define a higher than simple majority to confirm certain decisions, e.g. Volkswagen may only move a production plant when 2/3 of the supervisory board agree.

[OttoVonBismarck]

I got no idea what fahdiz' beef is with this analysis.

I think it's possibly because he still believes there's some sort of free market solution to our troubles, as defined as gross inequality and wage stagnation, which there obviously isn't.  Even Yi would probably concede that.  But fahdiz is (perhaps) trapped between the rock of wanting to believe in America and the hard place of America sucks.

I think fahdiz and to an extent popular culture has misunderstood Ford's position on the Model T. His goal wasn't really "make a car that my employees can buy, because somehow my actual employees buying a bunch of my cars is a winning business model." I think it's more fairly summed up as, "My employees are at a wage level consistent with the average in America, so if I can produce a car that they can actually afford then the market for my cars will be a substantial portion of the American working population whereas my competitors market is the niche set of Americans who have substantial net worth and income."

And there is obviously a solution for our problems. I proposed in another thread that you make servants wages a 100% tax deduction. In ages past guys like Gates would employ a huge staff of servants (I'd wager he has less than 10 full time "staff", and may even have none.) Guys like Romney or even lower wealth people would have a half dozen employees in their household. With modern technology it's not that required, but if it was 100% tax deductible I think a lot more wealthy people would have full time groundskeepers, personal chefs etc.

[fhdz]

"My employees are at a wage level consistent with the average in America, so if I can produce a car that they can actually afford then the market for my cars will be a substantial portion of the American working population whereas my competitors market is the niche set of Americans who have substantial net worth and income."

That's exactly my understanding of his business model.

[CountDeMoney]

And there is obviously a solution for our problems. I proposed in another thread that you make servants wages a 100% tax deduction. In ages past guys like Gates would employ a huge staff of servants (I'd wager he has less than 10 full time "staff", and may even have none.) Guys like Romney or even lower wealth people would have a half dozen employees in their household. With modern technology it's not that required, but if it was 100% tax deductible I think a lot more wealthy people would have full time groundskeepers, personal chefs etc.

Victorian England is the answer.  How progressive.

[garbon]

Well probably better than just creating completely unnecessary jobs - apart from making sure people can afford to live.

[MadImmortalMan]

That board is divided 50/50 between shareholder and worker reps but as Zanza says the chair is always a shareholder rep and has the tiebreaking vote.  So the employee reps can never prevail unless the shareholder reps disagree.  The real value for labor in the system is the right to consultation and information about the companies operations and strategic plans.  The value for the company is to bring labor "inside" so they have more of a stake in the long-term success of the company.

I imagine just being in the conversation brings enormous benefit.

[Sheilbh]

I think the German model's got a lot to recommend it. But it is one of those things where I think culture matters a lot.

From what I've heard the US union model has a bit more of a problem with corruption. In the UK I think we've always had confrontational industrial relations, in part because of the class system. It would make a system based on cooperation far more difficult.

But I always wonder about how culture and economics interact. Why does Britain have the worst mittelstand in the OECD and why is Germany's so large? Why do France and Italy still have absolutely enormous family businesses? There seems to be something in those sort of things that are somehow culture operating on economics.

[The Minsky Moment]

The companies in the mittelstand are in the sweet spot in terms of getting much of the benefits of German system with fewer of the downsides.  They don't usually have to implement full co-determination.  They get the benefit of overall wage restraint pacts that impact the whole labor market but they themselves are likely to be negotiating with a shop level works council.  The apprenticeship system also works nicely for them because it scales down well and emphasizes development of industry and company specific skills.

[Admiral Yi]

"My employees are at a wage level consistent with the average in America, so if I can produce a car that they can actually afford then the market for my cars will be a substantial portion of the American working population whereas my competitors market is the niche set of Americans who have substantial net worth and income."

That's exactly my understanding of his business model.

Then what about the Fordian (bless his name) model is it that you wish business would return to?

[fhdz]

"My employees are at a wage level consistent with the average in America, so if I can produce a car that they can actually afford then the market for my cars will be a substantial portion of the American working population whereas my competitors market is the niche set of Americans who have substantial net worth and income."

That's exactly my understanding of his business model.

Then what about the Fordian (bless his name) model is it that you wish business would return to?

PBUH.

I'd like to see more thought given to the actual consumers of goods and services and less short-term thinking about the bottom line by focusing almost solely on shareholder value. In smaller businesses the customer is king; in larger businesses at least in this day and age the shareholder is king and non-shareholders are treated like fodder or useful idiots. Ford showed that longer-term thinking and strategy could also be profitable.

[Admiral Yi]

But Ford was famously indifferent to his customers.  He continued to offer the Model T in only one color when customers wanted variety, and he continued to produce only the Model T when customers were looking for something new.

His great insight (apart from the efficiencies of assembly line production) was that a previously niche market product could, if stripped down, have mass-market appeal.  And we certainly have no dearth of businesses currently catering to the mass market.

[Razgovory]

If it doesn't work on a spreadsheet, it probably doesn't work in economics.

That's actually demonstrably false.

By all means, demonstrate.

[Admiral Yi]

The most powerful tool in economics is regression analysis, which a spreadsheet can't handle.

(Although some prominent economist once made the quip that the most useful tool in economics is long division.)