Human Capital




“The Green Makers”


Human Capital 2I recently came across a rather interesting blog in which the author decried those companies who think of their employees as “human capital” because, as he wrote, “While the denotation of ‘human capital’ remains innocent enough, the term’s connotation echoes master-servant ideology.” I think that author is correct in that assumption. I also think it’s an honesty I find rather refreshing because you don’t often get corporate America to admit what’s really going on these days.


What term do you suppose those who send jobs to China have for the poor peasants who ultimately do that work? Those workers are paid, on average 42¢ per hour and work an average of 60 hours a week in conditions so terrible that in one of the plants the leading cause of employee turnover is suicide! If the CEO of American Amalgamated decides the proper term for those poor souls in China should be Associates or Comrades or any other such thing, does it really matter? I mean, haven’t we already established that the difference between that kind of labor and slave labor is not spacious?


But go further than that. Take the case of Americans working in this country. What does a young person now starting out have for a beginning wage? What are his prospects if he works hard and cares about the company? I worked at a number of companies in my own working life and was always assured at the beginning of almost every job that I was a highly valued asset to them. The reality of that was always a bit different.

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We read quite a bit about the fall of Enron and the many millions lost by big investors, but what of the people who worked there, the rank and file who simply wanted to make a living, those who had invested in a retirement program they were assured was top drawer and then learned that it was fraudulent and they’d lost their entire fortunes. What of them?


What of the people who work nowadays? What kind of salary do they get, what kind of retirement package? Unions have been dying for years, and as they die, so dies the future of those who do the work that makes the company prosper. In recent years the manufacturing jobs have all gone to China, and this country has been left with the dregs. Lots and lots of working people these days have no future, no way to go, nothing that makes it better. What of them?


Just recently the city of Detroit declared bankruptcy. It was once a city of 1.8 million. It was prosperous. The automobile industry flourished, and the middle class did quite nicely for itself. And as the middle class flourished, so did the economy, because unlike the very rich, the middle class spend their wages, thereby creating not so much a trickle-down economy as a trickle-everywhere economy. Or better yet, flow-everywhere economy because the very rich tend to be misers, whereas the middle class has ever sought to improve its standard of living, and as it does so the economy prospers.

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But now we have case after case wherein automobile workers who were previously making a decent living are now glad to get a part time job in a fast food outlet. Does anyone really think they care what they are called? But let’s go further than that; let’s get down to the nitty gritty as we used to say back in the late Sixties when people were outraged enough to fill the streets with protests.


Follow the money, because that’s always where it lies. Just the other night I saw an installment on American Greed about the world’s biggest medical drug manufacturer that had been found guilty of deliberately recommending a pain killer drug for a great many things other than what it had originally been designed for. The upshot of this was that a very large number of people developed adverse side effects, up to and including death. Why were doctors proscribing it? Because the drug company’s sales department had convinced them that it was a miracle pain reliever. Once a drug is developed, of course, it costs almost nothing to manufacture it, so the profits are high. But this time round there were some whistle blowers, and the drug company was fined 2.3 billion dollars. Justice was served. Well, maybe not justice. The drug company denied that they had ever done it and promised to never do it again. And despite its being the largest fine ever accessed, the drug company sent a check forthwith for the full amount. It didn’t really strain them all that much, as that amount of money really only accounted for three weeks of drug sales. Think they’ll do it again? C’mon, that’s the safe bet, right?

Human Capital 6But ask yourself this: they knew the drug was not approved for those other uses, and after a period of time, they knew about the adverse side effects, but they did it anyway. What does that tell you about how they feel about the general public? Or those who work for them?

And going further, in that scenario does it really matter whether they call those who work in their plants employees, associates, or human capital? Sound cynical? There’s more.


Look at the actual working conditions for the vast majority these days. Every year health care becomes more expensive and delivers less, but the same single payer system used by every other industrialized nation is rejected as socialism. Even companies that could well afford it plead poverty, so a great many of the rank and file these days have gone without salary increases for several years. And no one says a word because the powers that be have let us know that the labor force is NOT to make things difficult for them. If they do, the fat cats will simply send those jobs to China because it’s like Nineteenth Century America there, and those who rule us all yearn for those days.


Personally, I like the term human capital. It gets us ready for what’s coming next. Today’s human capital is the future’s Soylent Green.



The Problem with MBAs




“Mamas, Don’t Let Your Babies Grow Up to Be MBAs”


clip_image004For a long time I did not know what an MBA did, and once I found out what they did, I still did not know what they did, or that is to say, I did not know of any essential service they provided. The dictionary definition of Master of Business Administration (MBA) is a master’s degree in business administration. And I am told further that the program is designed to introduce students to the various areas of business such as accounting, finance, marketing, human resources, operations management, etc. Armed with their MBAs, the young, the eager, and the ruthless have transformed the world of business in a surprisingly short time. When they first developed, they were dismissed as bean counters. Sadly, their effect on the world of business has been considerably less benign. The reason’s simple. They count and measure and squeeze every drop of juice out of an orange. They do not invent or produce or become passionate at the sheer joy of creating. They cut costs and kill dreams and often destroy businesses.


I first entered the world of business in 1967 when I was hired in one of the advertising departments for a large city newspaper. After a few years I noticed a change in management. It was a family business, and they continued to promote their own (nepotism is the word you’re groping for!), but the new breed of managers coming in didn’t know anything about the newspaper business. One of the new managers, a guy the same age as me, explained that he’d learned all that was necessary for his type of managerial style when he got his MBA. I really couldn’t see how he was going to manage something he didn’t know anything about, but that philosophy was in vogue then and they ran with it. When I left in 1982 I came away with a wariness of that kind of thinking. Any business must prosper or perish, but with the Young Turks, all the emphasis seemed to be on turning a nickel into a dime, how one got there being deemed irrelevant.


One of the more timely books I’ve read in recent months was actually published in 1986 and deals with matters one would have thought long since settled, but the hubris that created the problems described in the book, because it’s hubris, has simply multiplied like some sort of malignant corporate hydra. It’s “The Reckoning” by David Halberstam but it really should have been entitled “The Beginning of the Decline and Fall of the American Economic System.” The book itself, for those not familiar with it, deals with the problems of the automobile industry, more specifically, with the reaction of American auto makers when the Japanese first entered the fray. What makes it timeless is the persistence of the very pMamas, Don't Let Your Babies Grow Up to Be MBAs 4roblems and attitudes that so plagued Detroit at that time—and still do. These days, of course, Toyota is the Number One Auto Maker in the world, but they did not begin at that place and might never have achieved it, but for the very people Detroit thought would save them.


It was the Whiz Kids. They started in World War II as a group of young, undeniably brilliant, hand-selected junior officers who were sent to Harvard Business School for a special two-month course in the use of statistics. Thus armed, they developed a system of statistical control to bring rationality to decisions about military production. They really were a success at improving the logistics of deciding what was needed where and how best to get it there, and from that they began to think that they could run any business once the war had ended. And they went further than that. They decided they would job prospect en masse, seeking out those struggling companies most in need of their services.


They ended up at Ford Motors, having been, as they wished, hired as a group. Charles Thornton, who’d put the group together, soon went on to other things. The rest, led now by Robert McNamara (future Secretary of Defense under Lyndon Johnson) stayed on. At first they were finance people, the numbers people, bean counters, but all that counting and analyzing quickly became detrimental.


“Finance was soon a power of its own. Its principal driving force was Bob McNamara, and its basic philosophy was: Whatever the product men and the manufacturing men want, deny, delay it as long as possible. If in the end it has to be granted, cut it in half. Always make them fight the balance sheet, and always put the burden of truth on them.” David Halberstam, The Reckoning Pg. 236


Mamas, Don't Let Your Babies Grow Up to Be MBAs 5Paradoxically enough, it is a theory that both works and does not work. Yes, they could often save money for the company by simply making it more efficient, but there was that constant nagging idea that any additional cost was always detrimental to the bottom line, so a less expensive alternative, regardless of its merit, was the preferred path. That kind of thinking immediately ran up against one of the primary obstacles in competing with General Motors—the age of Ford plants. By 1949 they were in desperate condition. They were really leftover Model T Factories, and it showed. Plant people couldn’t even get a forklift into them to move materials back and forth because the aisles were too narrow. The obvious solution was to modernize, but the Whiz Kids constantly fought against it. By the time McNamara became head of the Ford Division, matters had come to a head.


“Nothing reflected the new split personality of the Ford Motor company, the clash between modern efficiency and old-time flawed reality, more than the battle of the paint ovens. Because the plants were in bad shape, inadequate to produce cars for the hungry postwar customers, there was soon a violent collision between McNamara and the manufacturing men over these facilities. The plant men wanted newer and better factories. McNamara wanted greater speed from the existing plants. The bottleneck, it quickly became clear, was the paint ovens. They were old, technologically outdated, and too small for contemporary cars. A manufacturing man, Neil Waud, told McNamara at one meeting of senior officials that there was no way that the painting could be expedited. Waud was stunned when McNamara then suggested that the chassis be built in two main parts, painted, and then welded together into one piece. Waud quickly explained why it was impractical, that the welding could not come after the painting and that even if it could, the car thus produced would be significantly weakened and vulnerable to all kinds of stress. But McNamara was insistent; there had to be a way to do this to speed up production. The more insistent he was, the blunter Waud became. ‘The problem with you,’ Waud shouted, ‘is you don’t know a goddam thing about how our cars are actually made.’ After the meeting broke up, McNamara turned to one of Waud’s superiors and said, ‘I don’t want that man at any more meetings.’” Ibid., Pg. 242


Notwithstanding the absurdity of McNamara’s position on that particular issue, he continued to prosper and eventually became President of Ford Motors, the first nonfamily member to do so. A year later McNamara left and was replaced by another numbers cruncher. Interestingly enough, McNamara went to the Defense Department and helped bring us the tragedy of the Vietnam war, no doubt something he managed most efficiently while presiding over the death of some 56,000 Americans, 1,000,000 Vietnamese and the utter devastation of a third world country for absolutely nothing. But to return this to business, the problem with not actually having a passion for making automobiles tells and tells very quickly.

Henry Ford was a tinkerer. He loved motors and having grease on his hands, loved developing new automobiles, and on the basis of that love, he eventually prospered as developer of a low-priced quality automobile. For the first few decades all who prospered at Ford Motors were also tinkerers, people who loved and died for automobile innovation. What changed all that was turning the plant over to numbers people, MBAs. Their sole objective was to squeeze a nickel till the buffalo pooped a dime.


Mamas, Don't Let Your Babies Grow Up to Be MBAs 6Nothing so illustrates the problem with numbers people running the show as the undercoating problem. One of the places on an automobile most prone to rust is the underbelly of the vehicle. They did paint it, but they were never able to get paint in all the nooks and crannies, and whatever they missed was vulnerable to rust. Finally in 1958, someone at Ford Motors came up with an idea of sheer genius. The E-coat was applied the way metalworkers plate metal with silver or chrome. The car body was completely submerged in a tank of paint and given an electrical charge, thereby adhering paint to every surface. It meant that vehicles had a much longer life because they wouldn’t rust so easily. But it meant, too, that the production people at Ford Motors were in for several decades of denials.


The MBAs running the show repeatedly pointed out that no one could put a number on a satisfied customer, and it would cost a hundred million or so to implement E-coat in all of their plants. Year after year Ford wrestled with rising loss numbers on their warranty guarantees because of rust issues, but the numbers people continued to prevail. And to add insult to injury, Ford Motors licensed that process to other automobile manufacturers, who promptly implemented it! Not until 1984, some 26 years later, did Ford finally use that method in all of their plants and only because the Japanese had long subscribed to it and used it in promoting vehicles which had, as one of their principle selling points, superior quality.


Despite the obvious quality control issues, Ford Motors actually prospered, and that, in the end became what business people are wont to describe as the “take away.” And because it was largely the culture fomented by MBAs that had produced such profits, the feeling began to develop that it was not necessary for people to actually know anything about any business they might care to manage. If they had mastered business administration, product knowledge was irrelevant.


Mamas, Don't Let Your Babies Grow Up to Be MBAs 8I was once a huge fan of college basketball, and one of the things I remember is games in which a team would get a large lead by taking chances on both offense and defense. Then they would concentrate on protecting the lead to such an extent that they would eventually lose it, at which point the announcers would be sure to point out that they had “forgotten what got them the lead.” American manufacturing used to count for something. Now it doesn’t, and I honestly believe MBAs have played a factor in that unfortunate development.


I don’t think MBAs are necessarily greedy or even that they create greed, but what I do think is that they enable greed. Part of the problem with a corporation is the many ways in which it can prosper, only some of which are beneficial. Invent a better mousetrap, and the world beats a path to your door, they say. What often goes unmentioned is the flip side of that—sell the sizzle, not the steak. Which is to say that if one can simply create the appearance of a better mousetrap, one can continue to peddle the old. And if it costs money to implement the better mousetrap, as it did with so many of the quality issues that plagued Ford Motors during the years surveyed by Halberstam and in the decades since, well, the solution seemed obvious. Sell the sizzle. So the American public is continually subjected to slogans like “Quality Goes in Before the Name Goes On” and “Have You Driven a Ford Lately,” while the deliberate inferiority of the product itself continues unabated.


MBAs did not create the type of mindset that sees only the bottom line, but they have surely contributed to it. In that sense, I suppose it’s a lot like the gun debate. One of the lines used by the NRA is, “Guns don’t kill people; people kill people.” To which the answer often is, “Yeah, and they use a gun to do it.” Paraphrasing their slogan, than, those who defend the status quo might well say something like, “MBAs don’t pervert corporations; corporate management perverts corporations.” In both instances the instrument used to accomplish those ends is obvious. Please remember that, mamas, when your children go to college.



“Why, Back in My Day…”

The Good Old Days


I recently came across an item on the Internet which depicted the “horrors” of the world those of us over the age of 40 inhabited before these modern days of cell phones, texting, video games and the lot. It was one of those tongue-in-cheek articles that ended with the inevitable “You kids today have got it too easy. You’re spoiled rotten! You guys wouldn’t have lasted five minutes back in 1970 or any time before!”


I laughed when I read that article, not so much because of the funny lines in it, but simply because I actually think I had it much better than the younger generation. And I’m a whole bunch of years over 40. I grew up without a whole lot in the way of toys because we were too poor for that. Our main toy was cardboard boxes we got from the back of furniture companies, but with imagination, they became almost anything. So I developed an imagination. There were no calculators, so I learned arithmetic, and if I were at the cash register and the power went out, I’d still be able to make change.


Because I had no machines with spell check, I was forced to learn how to spell, a process that developed my memory. There were no excuses permitted for undone homework in those distant days, so I learned how to be responsible for my actions. Since typewriters were all there was, I learned how to type seventy words per minute. Since I had no grammar check, I learned the rules of English grammar. Because developing children’s self-esteem had not yet become a mantra, I learned to give everything I did my very best efforts and to not make excuses for failures.


Because there were no video games of any kind, I learned how to better utilize my time and how to keep myself entertained whenever I was forced to simply sit and wait. To this day I can sit in a waiting room for hours with neither book nor game nor TV and pass the time quite happily by simply thinking about the projects at hand. Because we didn’t get a TV of any kind until I was in the fourth grade, I got to listen to the tail end of radio shows. I have the memory of lying in front of the old Philco radio in a room illuminated by its golden glow. And by the time we finally got that old time-wasting TV I had already developed an undying love of books.


Because we had no Kindles in those days, I have the memory of checking books out of the library and reading half of the first one as I slowly walked back home. Because the world was not so paranoid and bizarre, and because I grew up in Helena, Montana, as kids we simply told our parents we were going camping overnight and went without another word from them. Truth to tell, I don’t even think they knew where the pond was we always hiked to.


I grew up without a cell phone, but I did not grow up without values and skills and a love for learning that is with me yet. Quite frankly, I think it’s the younger generation that is deprived.