by Dan Shafer •
Google's stock has dropped 10% in the past three trading days. The reason? Google committed the unforgivable sin of missing projections made by a handful of people whose behind-the-scenes manipulation controls the stock market in ways that are both indecipherable and unconscionable.
by Dan Shafer •
My good friend @Toby_Lytle passed along this video link. I highly recommend you find a few minutes today to watch it. Prepare to be amused and amazed and enervated. It's a rare video moment of insight, candor, humor and surprise.
by Dan Shafer •
We must find a way to incorporate into our valuation of businesses the social costs of their policies, particularly environmental and labor. Absent such accountability, companies will continue to destroy the humans over whose lives they have such significant control. And the socio-economic fabric that is America will continue to decay with increasing rapidity until we indeed lose our Way of Life.
There is an old saw that describes someone as knowing the "cost of everything and the value of nothing." There seems to me to be a corollary in big business and, often, in government where leaders seem often to know the cost of labor but not the value of responsible behavior.
This thought has wandered around in my mind gathering new examples and evidence for some time. I was finally moved to write about it this morning by a column by Joe Nocera in the New York Times that my buddy Tony Seton shared with me. In that article, Nocera says that the recent shocking dismissal of HP CEO Mark Hurd had as much to do with the fact that he was universally hated by virtually all of the company's employees as it did with the red-herring sex-and-expense-report-padding "scandal" that was the publicly cited reason.
One rank-and-file worker Nocera talked to said Hurd "…was a cost-cutter who indulged himself." Nocera cites long-time industry analyst Rob Enderle as reporting that "…in recent internal surveys, nearly two-thirds of H.P. employees said they would leave if they got an offer from another company — a staggering number."
The HP employee-loyalty problem is perhaps the best-publicized current example of the socially unconscious and unconscionable management of the vast majority of America's businesses, particularly big companies. The problem is systemic and endemic and probably not reparable. At its root, the problem is capitalism, but that's a bit too simplistic to be useful. I believe it is possible to create a society built on capitalist economics without the accompanying runaway social injustice this country has witnessed for the past 30 years. It just hasn't been tried yet.
Under capitalism, the cornerstone of which is the private ownership of the means of production, business has one goal: maximizing profits. There are basically only two ways to increase profits: decrease the cost of producing products or increase the price of the products. Competition and social pressure often prevents following the second course of action. Thus a CEO like Hurd focuses on cost-cutting that is often described as "brutal" as was the case with his approach. He was undeniably successful from an investor's perspective: the company's stock price doubled on his watch.
The problem is, cost-cutting is almost always focused in one place: reducing jobs. Firing people. Laying people off. Demanding that those who remain in the workforce do more with less and necessarily reduce the quality of their lives. And damn the social consequences and costs of any of these steps. Those are not the company's problem. So the burden falls on society (read, the government) to deal with. But it can't do so at no cost, so it has to act like a business and increase its revenues (read, taxes). Which causes the conservatives who are by nature pro-business and anti-government to go apoplectic. Meanwhile, the rapidly disappearing middle class sits on the sidelines helpless, unrepresented in government, unemployed by business focused solely on the bottom line.
This cycle is in many ways identical to the fact that businesses who make products from raw materials extracted from the earth without regard for the cost of those resources themselves, only on the costs of extracting and converting them to their purposes. In this case, the natural resource is humanity. And although it is eminently renewable, it is not inexhaustible. More importantly, human resources are a visible and active participant in the economic processes of which businesses are also a part. When any part of that fabric — whether business or labor or government — is damaged, the entire system suffers. And it is the linkage among those three elements that businesses in America ignore. To their great peril, I suggest.
I'd be surprised if I didn't have more to say about this important topic. Please feel free to share your thoughts with me on my blog.