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20191006 – Big Business

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MAIN IDEA:

The main idea of this book is to present kind of pro-business manifesto that would reject typical attacks against business and present reasons to believe that overall role of business and specifically big corporations is a lot more positive, than many people believe.

DETAILS:

  1. A New Pro-Business Manifesto

It starts with the simple statement that without business nothing in economy would be created or moved. Then author proceeds to extoll particular virtues of American Business such as superior management practices: “It has been estimated that Chinese firms could increase their productivity by 30 to 50 percent and Indian firms could do so by 40 to 60 percent merely by bringing the quality of their management practices up to American levels.”  After that author compares American Business and Government and concludes that former clearly works better than latter. Finally he states that he was prompted to write this book by massive attack against business from the left and from the right that led to low level of trust that it has with American public, which is even worse than trust in nearly all other institutions:

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At the end of chapter author expresses his believe that business deserves better trust and his intention to provide prove of it in this book.

  1. Are Businesses More Fraudulent Than the Rest of us?

The obvious response presented in this chapter is “NO”, the business is no more fraudulent than regular people and probably quite a bit less than public employees. Author discusses a number of studies confirming this and then moves into psychological research demonstrating that CEOs are more trusting than regular people. He also provides some interesting data obtained from cross-cultural research demonstrating that people more exposed to developed market economy are more honest.

  1. Are CEOs Paid Too Much?

Author position here is that CEO properly paid that much because their decisions have huge impact on success or failure of very big businesses and these decisions are highly non-trivial. He discusses skill set of the modern CEO and here is some really funny citation:”The CEO is the modern world’s equivalent of a successful philosopher, as a good CEO must have a reasonably well-rounded sense of nearly the entirety of the contemporary human experience, whether as worker, consumer, funder, media communicator, or political activist. In reality, there is no other job that is as—yes I will stick with that word—philosophical. Good CEOs are some of the world’s most potent creators and have some of the very deepest skills of understanding.

Author also refer to interesting research on what happens when CEOs dies. The usual consequence: companies lose at least some value. The final point in this chapter is author’s attempt invalidate usual view that CEO’s time span of planning is too short and they are sacrificing long term prospective for short term gains.

  1. Is Work Fun?

Author looks at polls demonstrating that work is not fun, but then at work time data demonstrating that people work now more hours than they used to. There was also an interesting research checking hormones of people during work hours and at home for stress. It turned out that being at home often is more stressful than work.

Author concedes that not everything is perfect in work places and there is not very nice staff about harassment, companies taking advantage of their workers using market power, and so on. However all this often comes not from company policy, but from other employees. At the end of chapter author compares different organizational forms and finds that coop is not that good either.

  1. How Monopolistic Is American Big Business?

The analysis here provides that business is by far less monopolistic than people think and that really big and bad monopoly are government monopolies such as K-12 education.

  1. Are the Big Tech Companies Evil?

Here author goes through usual litany of accusations and responds:

  • Competition in high tech did not disappear
  • Tech Companies continue innovating
  • Internet and computers does not make humans stupid

However there is one area in which author does have a very serious concern: loss of privacy, and he discusses it in details.

  1. What Is Wall Street Good for, Anyway?

This chapter is response to wave of accusations against financial business, usually by people who have now clue about finance role in contemporary world. So author explains:

  • VC drive innovation – no startups without money
  • Companies shares allow people participate in financing business and benefit from stock appreciation
  • Comparatively to other countries Americans are taxed less and have reliable banking system.
  • American financial system did not grow unreasonably big, but rather grows in proportion to increased wealth of society when ratio of assets to income is growing all the time.
  • Americans have huge benefit from the scale of their financial system because it supports global peace and prosperity by assuring money, goods, and services flow relatively unimpeded.
  1. Crony Capitalism: How Much Does Big Business Control the American Government

This chapter is about business influence on government, and author makes very valid point that government constantly interfere into business imposing demands and regulations, so all this lobbying is pretty much business self-defense against predatory politicians.

  1. If Business Is So Good, Why Is It So Disliked?

In the first part of this chapter author discusses anthropomorphizing corporations. The corporations encourage this attitude by using symbols that aim to personalize them as trusting friends and supporters. It is especially obvious no when corporations are active on social media and use AI to interact with customer via humanlike conversations and images. However there is downside from personalizing and it is ease with which corporation as personal friend could be turned into enemy. There is the whole industry, which is built on vilifying corporations – Hollywood. The movies usually based on fight between good and evil and humans who pay for entertainment associate with good in movies. Obviously the good had to be represented by humans, while evil could not. It had to be represented by some abstract entity like Nazis or Aliens or most often by soulless corporations. Similarly even if majority of people are corporate employees, they tend to perceive whatever good comes from their employment, as their fair deserve and whatever bad as expression of inhumane corporate nature. Author final word is about social responsibility of business and this is how he puts it: “And what, in turn, is the social responsibility of business? I don’t think there is a single concrete answer to that question except the following: the social responsibility of business is to come up with new and better conceptions of the social responsibility of business, ones that will both boost corporate profits and further other social ends, including prosperity and liberty. You might say the social responsibility of business is to come up with the magic of a vision that will help us trust it more, whether as consumers or as workers. Corporations won’t succeed all of the time at this, but American business, by enabling so much wealth creation and by creating so many new opportunities, arguably has outperformed any other set of private institutions in all of world history.” 

MY TAKE ON IT:

I think that the whole idea of anthropomorphized corporation is very harmful for the society because it allows really bad people to hide beyond corporation and often denies good people appreciation that they truly deserve. There are very complex and historically deep reasons for corporations obtaining personality including some legal and human rights like sue and being sued and recently even free speech. I personally think that this structure is outdated and just remains from time when it was impossibly to process information to the human individual level so one had to trust brand name of corporation or sue corporation for negligence of individual working for it. I think over the next few dozen years this approach will be gone and reward or punishment for good or bad actions would be directed not at the abstract corporation, but at the specific human actors.

I generally agree with author in his description and rejection of typical accusations against corporations, except for CEOs income.  With all justifications that author provides, the reality is that CEO compensation decided by boards appointed by CEOs, consistent of current and formers CEO, who, quite normally, view the world through CEOs lenses. If we remove possibility of CEOs as a group having infinitely higher moral standards than general population, which in my view is negligible, we should expect them to pay themselves out of investors’ pocket as much as legal system would allow. However taxes are not a reasonable way to go because taxes just mean that resources transferred from corporate bureaucrats to government bureaucrats, which generally are usually lot less competent. Similarly any limitations on CEO compensation only serve to direct efforts at avoiding such limitations instead running corporation to benefit of owners. The only reasonable way, in my view, would be create direct and simple link between company performance and CEO actions in such way that poor performance would guarantee low levels of compensation, unlike stock options, which quite often provide enormous compensation for average performance and huge compensation for poor performance.

 


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