corporate

Book review: Life Inc.

Philip Brewer — Tue, 07 Jul 2009 22:24:01 +0000

Life Inc.: How the World Became a Corporation and How to Take It Back by Douglas Rushkoff.

Corporations were invented a few hundred years ago--created to increase the wealth and power of favored businessmen (and the governments that favored them). They have become such a universal feature of our economy that few people give much thought to their origins--or how our economies are structured to suit them. But exactly that is the topic of Douglas Rushkoff's new book.

Rushkoff beings the book with an anecdote: After being mugged outside his apartment, he posted to a local internet forum so that his neighbors would be aware of what had happened. His neighbor's reaction, though, surprised him--how dare he post about such a thing in public? Didn't he know such talk would lower property values?

Maximizing economic value

Property value, of course, is a pretty abstract concept. Unless you're planning to sell (or refinance) your property, its market value should be of little interest--certainly of less interest than the presence of muggers working the sidewalk in front of your home. And yet, Rushkoff's neighbors clearly felt otherwise. Rushkoff's analysis: They were thinking like corporations.

Corporations are legally required to try to maximize their economic value. A board of directors that didn't do so would be failing in its fiduciary duty to the shareholders. People, of course, have no such legal obligation--and yet, as Rushkoff's anecdote shows, people often behave in that way as well. How come?

That's the story that Life Inc. tries to tell, and a fascinating story it is. He talks about the earliest chartered corporations--monopolies licensed by the crown--and how they were designed to extract value from the periphery (India, Asia, Africa, the Americas) and bring it to the center. With a few exceptions, corporate charters no longer grant monopolies, but by now the whole structure of the economy is designed to favor corporate thinking and to facility its original purpose of drawing the value in to the center.

Local money versus centralized money

One of the most interesting pieces of the tale is the story of money.

Over most of history, the things we think of as classical forms of money, such as gold and silver coins, were mostly used by governments and traders. They were used to finance long-distance trade, because they held their value--even when the trader was 1000 miles from home. Close to home, though, they didn't see much use. Peasants are largely self-sufficient, and most of what they can't produce for themselves they can trade for locally.

Even locally, though, some form of money is very handy--it's easier than barter for all the reasons that people have always preferred money. Since gold and silver were largely monopolized for governments and international trade, throughout the middle ages local money (in various forms) was very important. Instead of being backed by gold or silver, local money was generally backed by agricultural products such as grain or tobacco.

In practice, local money produces a very different result from centralized money. Since agricultural products deteriorate with age, there's no good reason to hoard money. The smart thing to do is to spend it on some productive asset--land, buildings, livestock, tools--or at least on something that can be made more valuable with labor. The result of people following that logic is thriving local businesses, producing goods with local materials, fully employing the local labor.

In fact, according to Rushkoff, the period of the middle ages when local money circulated side-by-side with centralized money brought Europe to a peak of affluence it had not seen since the Roman empire, and would not see again until the industrial revolution. It was in this period that the great cathedrals were built--among other reasons as productive assets: as tourist attractions to bring in pilgrims.

Modern corporations

There are many good bits to the book. I particularly liked a couple of great examples of the same thing I was talking about in my article that described modern corporations as specialized venture capital firms. He talks about being hired as a consultant by a company that called itself a major American television manufacturer--except that the TVs were outsourced to Korean manufacturers, the design to a design firm in San Francisco, the marketing to a New York agency, and fulfillment and delivery to a major shipping company.

I also liked this bit:

During the famous dog-food-poisoning crisis of 2007, worried consumers called their dog-food companies for information. Were the brands getting their chow from the plant in China responsible for the tainted food? Many of the companies couldn't answer the question. They had outsourced their outsourcing to another company in China that hadn't yet determined who had gotten which food. The American companies didn't even do their own outsourcing.

The core of the book is this analysis: The economic structures that worked so well for extracting wealth from the colonies and bringing it to the capitals of Europe are still at the heart of modern corporate structure and modern economies. And, because they were designed to draw wealth from the center, they continue to have that effect. And, since the rules were designed to favor corporations over ordinary people, people come in second unless they act like corporations.

The thing is, people aren't corporations. When they try to complete on those terms, they lose. The ones who do it better than others might come out ahead of their neighbors, but they still lose to the corporations.

There are always two parts to a book like this. First, there's the analysis of the problem. Rushkoff has done well here. He lays out the case that there is a problem, and offers a compelling analysis that the economy is structured in such a way that only corporations can win. The second is to propose solutions.

Solutions

Many people have suggested that the solution is simply for people to out-corporate the corporations. After all, corporations are made up of people, and when you get to the bottom of it, people do all the work anyway. Rushkoff says this won't work--when we try, we will always end up competing with one another:

Instead of working with one another to create value for our communities, we work against one another to help corporations extract money from our communities.

The solution, Rushkoff says, is to reconnect locally in our own communities. When we move local interactions outside the realm of the money economy--when we interact with one another as friends and neighbors--we deny the corporations the opportunity to extract value.

That doesn't mean it's easy, though:

The psychological hurdle to cross is the inability to accept that ten thousand dollars of one's time spent making a local school better will create more value than thirty thousand dollars of one's money spent on a private school. The money guarantees a great education for our own kid, the time improves the school for everyone's kids. Still plagued by internalized competition and self-interest, most of us are not quite ready to chose the better path, or to convince our neighbors to join us in the effort.

The best bits of the book are the stories about the history of corporations and the history of money--which is sad when it's a description of the problem but happy when it's examples of ways things can work better.

The stories of present-day efforts to return to interacting with one another as people rather than as corporate-style economic entities are not quite as compelling--largely because their very nature is to be local to a specific time and place and circumstance. They can serve as examples--even as models--but unlike deciding to act as a purely self-interested individual (which an individual can just do), interacting like people requires that others do the same.

As I say, the analysis is compelling--and the recommendations are compelling as well, even if it's a bit daunting to see a path to following them. The book is an excellent resource for anyone who wants to know how the economy got to be the way it is, and how we might do better: Life Inc.: How the World Became a Corporation and How to Take It Back by Douglas Rushkoff.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Don't treat businesses like people

Philip Brewer — Tue, 18 Nov 2008 19:29:01 +0000

When you fall short of meeting your obligations, it's natural to feel bad. In fact, it's natural to want to not only meet the letter of your obligation, but also the spirit: to do what it takes to make the other person feel fairly treated. These feelings are very human, and they work well when you're interacting with humans acting as individuals. When you're dealing with businesses, though, they work against you--and businesses will take advantage of that.

Nobody is much surprised when a corporation meets its legal obligations but goes no further. People like to suggest that going beyond is often good business--a reputation for providing good service is worth something--but they don't think it's a moral failure when a corporation does only the legal minimum, because everybody knows that corporations are not moral entities.

With people, though, the rules seem different.

You see this distinction especially starkly with bankruptcy. A person will often feel shame at the idea of bankruptcy. Obviously, a corporation does not. (The owner of a very small corporation might, but that's just another example of confusing the person with the business.) When a corporation files for chapter 11 and the court tells it that it doesn't need to honor its gift cards or its pension obligations, no one imagines that they'll be able to get better treatment by making the corporation feel bad.

Corporations, on the other hand, use this sort of moral suasion to try to control people all the time. You see it, for example, with debt collectors--they try to establish something that seems like a personal relationship, so that the borrower feels bad about being unable to meet his obligation.

You see it most often with employees, because the constant interactions between employee and manager create a circumstance where it's natural to feel a personal relationship.

When a friend of mine quit one job to take another, his old employer offered a large raise and said a lot of nice things about how important he was and how highly valued his work was. My friend was feeling bad about leaving and seriously considering changing his mind, because he wanted to do right by his moral obligation to his old employer, but then remembered that he'd had a salary review just a few months before, where the focus had been on his shortcomings and where the employer had put a dollar figure on the value of his work that was quite a bit lower. Neither those critical statements nor the new complimentary ones were a reflection of what the corporation actually thought--after all, corporations don't think. Rather, both were an attempt by management to get what they wanted--my friend's work at the lowest possible cost.

Another friend was hesitating to move to a much better job, because when she'd been hired, her boss had asked her to "commit" to stay until the end of a project and she'd done so. I pointed out that there were many things her boss might have done to give her incentives to stay--most obviously, he might have given her a contract with a completion bonus. Not only had he not done that, he hadn't given her a contract at all--and I'm sure he wouldn't have "committed" to keep paying her until the end of the project even if business turned down. He had asked for a commitment because such a request costs nothing, and just might work.

Corporations would rather not do expensive things like paying competitive salaries, giving regular raises, and offering a pension to reward long-term service. That costs money, and corporations would rather not spend money. So, they usually start by trying to use a sense of personal obligation to get people to do whatever will help the business. That's why they ask people to "commit" to the company--they do it because they know people will feel obliged to stand by their word, and because guilt is much cheaper than paying a project completion bonus.

This is true for relationships besides just that of employee--customers, borrowers, clients, and venders are all subjected to similar efforts, where the corporation tries to structure things so that people feel (and behave) as if they were in a personal relationship with the business. They do this because it works. It works because people have trouble distinguishing between their legal obligations and their moral obligations, they allow their feelings to push them into making poorer choices.

Because this is all a deliberate effort by corporations to control you, it's sometimes not quite clear what kind of relationship you're in. After all, even though your counterpart is a corporation, your interface with it--boss, loan officer, salesperson--is a person. The whole thing is structured to make you feel uncomfortable if you leave him or her in the lurch. Don't be fooled.

None of this is to say that you're not stuck with your legal obligations. I'm not suggesting that you cheat or steal or even engage in sharp practices or take advantage. But don't imagine that you have a moral obligation to a business. Your moral obligations are to people.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Fund your own sabbatical

Philip Brewer — Wed, 10 Sep 2008 22:19:39 +0000

I never got a sabbatical. My dad was a college professor, so I knew from a young age what a sabbatical was. I always paid attention whenever one corporation or another would be in the news for establishing (or, more often, eliminating) a sabbatical program. Eventually, I gave up on ever working for a company that understood the benefits of a sabbatical program—and put some effort into trying to create my own sabbatical. As I say, I never got one, but maybe it's not too late.

What you need to construct your own sabbatical is pretty straightforward: you need time, money, and a project. I'm going to talk about those in reverse order, because the project is really the heart of a sabbatical.

Project

A sabbatical is not a long vacation. Long vacations are all well and good—I recommend them highly—but they're not what I'm talking about here.

A sabbatical is an extended period of leave from your regular occupation in order to devote the time to some project. Some people use the time to write a book. Some people do research. Some people design or build or test something. If you're not a teacher in your regular job, spending some time teaching can be an excellent project for a sabbatical. Travel is often involved, not because it's fundamental to a sabbatical, but simply because a person with a regular job can't usually go someplace else for a significant length of time, except on a sabbatical.

Places that offer formal sabbaticals almost always have an application process, which entails producing a plan for your project. Even if you don't have to write an application, you should definitely write a plan. It should include all the ordinary stuff such a plan would have:

Goal -- a short statement of what you're trying to do
Actions -- a description of what you plan to do to achieve your goal
Deliverables -- a description of what you're going to have to show for your work
Schedule -- milestones along the way, so that you can track your progress
Budget -- not only the special project expenses, but also your ordinary living expenses

The classic sabbatical was a year long. Universities used to offer 9-month sabbaticals (one school year, on the theory that you already got the summer off). Last I heard, lots of universities were trying to get away with offering one-semester sabbaticals (and it's probably gotten worse since then).

The thing to remember, though, is that your sabbatical should be sized in proportion to your project. If you've got a short project, a short sabbatical is appropriate. And, if you're only going to be able to take a short sabbatical, then maybe you should put off any huge project you might have in mind until next time.

This is why a schedule is part of your plan: To match the size of your project to the length of your sabbatical, and vice versa.

Money

Despite the title of this post, I'm actually going to say the least about the money, because raising the money is straightforward (which is not to say easy). You raise the money for a sabbatical the same way you raise money for anything else—you spend less than you earn.

Saving for a sabbatical isn't much different than saving for a new TV—you need more money, but you don't need huge outsized amounts of money.

In that way it is different from saving for retirement. To retire you need so much money that most people (even most frugal people) will need to save for their whole careers to put enough aside. Saving for a sabbatical is not nearly on that scale. It is a commitment, though.

Let's suppose that you'd like to take a sabbatical in seven years. (Every seven years is traditional.) That gives you 84 months to save up the money. Since you came up with a budget as part of your plan, you know how much money you need. Divide it by 84 and see how much money you need to set aside each month.

If the result is too daunting, I suggest a two-step process. First, economize in your plan. (Since just being on sabbatical is a serious boost to your standard of living, surely it's worth making a few small sacrifices that will reduce the cash demands of supporting your household.) Cutting your sabbatical budget will reduce the total you need to save. Second, apply those same sacrifices to your regular budget. (Just the prospect of a sabbatical is a boost to your standard of living, etc.) That will free up the cash you need.

Unless you live alone, your family will no doubt have something to say about these economizations. Happily, if you don't live alone, there's always the option of putting other members of the household to work earning some of the money needed to support you during your sabbatical. That can reduce the amount that needs to be saved considerably.

If you own a house and plan to travel on your sabbatical, it may well be possible to rent your house out for the period of your sabbatical and bring in some money that way. (College professors do this routinely, usually to other college professors on sabbatical. You can do the same. College professors are usually not too bad as tenants.)

If you work at a university or a non-profit, it might be possible to get grants to support your sabbatical—but if you do, you probably know more about it than I do.

Time

Here, I think, is the crux of the problem for most people. Coming up with the money may be hard, but at least the process is clear. There is no such clarity in the process for coming up with the time—this part is different for everyone.

More employers than you might suspect have some sort of program for sabbaticals (although often unpaid). The ones that don't, except for the very smallest, at least have some sort of program for a leave of absence. The rules—about such things as whether you can keep your benefits and whether you can count on getting your job back—vary from employer to employer. The first step is to find out what those rules are.

Frankly, though, the rules scarcely matter. The real problem is dealing with your boss (and his or her boss) and your coworkers. Just raising the topic may be a problem—wanting to take a sabbatical is going to be viewed by some people as showing a lack of commitment or a lack of loyalty.

Worse, even a company that claims to support the idea of a sabbatical (or other leave for personal growth) can't be trusted. If business conditions call for a layoff, you can be sure that anyone on leave will be the first to be let go, because that's the person they already know they can do without.

Still, the key to both the issue of getting permission to take a sabbatical and getting your regular job back afterwards is in the project. (Which is why it's in first place in this list.)

If your project is worthy—if it's both worth doing for its own sake, and if doing it will improve your skills and abilities—then you've got a reasonable shot at making your case to those bosses who don't dismiss the idea out of hand.

Likewise, if you do produce something of value, and you do improve your skills and abilities, then you come back from your sabbatical more employable, not less. Even an employer who has gotten along okay without you will be pleased to have you back. And, if your previous employer can't find a place for you, then you're in a better position than you might suppose to find a new job—you have a much better, much more interesting story to tell of how you left your previous job then the other applicants, because you have your project to point to.

Two Suggestions

Document your sabbatical

In the old days you might have kept a journal or maybe written a series of letters to your colleagues. Nowadays, a website and a blog seem like no-brainers. Begin by posting your plan documents (perhaps edited to remove personal information). Then post daily (or almost daily) a brief note on that day's work. This will do two things. First, it will help you get the most from your project--reflecting on each day is a powerful tool. Second, that documentation will be one of the things you can show people when they ask you things like "Why did you leave your previous employer?" or "Why do you want to work here?"

Integrate other people into your work

Few people go on sabbatical with enough money to hire assistants or even interns. However, a sabbatical is a great opportunity to invigorate your network. Reach out to the people you know who might take an interest in your work or career and ask them to participate in small ways. Tell them about your project and ask if they know of work that overlaps with what you're doing. Ask if they're aware of something closely related that ought to be in your plan. Ask if they know of tools you could use or books you should read.

Obviously, the requests need to be scaled as appropriate. Don't ask everyone in your network to review your plan and send comments. But it might well be worth directing one fairly specific question to each person in your network. (If you've literally got nothing to ask them, maybe they don't really belong in your network, at least with regard to that project.) Then, make sure they get an occasional update on your progress.

Also, don't hesitate to use the opportunity to expand your network. If there are people out there who might be excited by your project, don't hesitate to let them know about it. Ideally, get a mutual connection to forward a note about your project. But, if you don't have a mutual connection, it's not going to do any harm to write a short piece of email that says, "I'm working on this cool project and thought you might be interested." At the same time, ask for permission to follow-up with a question or two in their area of expertise, once you reach that point in your work.

Of course, be sure to include your colleagues and your boss in this process. The more they see you working hard and accomplishing things, the easier it will be for you to reintegrate when you return.

Your main goal here is to share what you're learning and what you're making. If you can also share some of the joy of spending a solid block of time focusing on a worthy project, that's a bonus. One side-effect will be that, if reentry to the job market doesn't go smoothly, your network will already be up-to-speed on what you've been doing.

Benefits for Everyone

If your employer will fund your sabbatical, I think you both benefit:

You get both the support and some amount of guidance in planning your project. Having a formal application process forces you to do the planning that you ought to do.
Your employer gets a certain amount of input into your choice of project, increasing the chance that what you produce (and, more important, what you learn while producing it) will be applicable to your future work for them.

Both of those benefits, though, are small. You're perfectly capable of planning your project without anyone making you. Creating a project that you care deeply about and seeing it through will have huge payoffs in terms of your future work, entirely without regard to whether there's any overlap between those tasks and the tasks you do in your everyday job.

Funding your own sabbatical puts you firmly in control, and that's a serious benefit right there. If your employer will fund a sabbatical, that's great. If not, that just might be even better.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

The disappearance of real America - my guest post at Zen Habits

Paul Michael — Wed, 27 Aug 2008 15:24:47 +0000

I'm not one for believing in fate or destiny, but the timing on this was spot on. After just finishing a terrfiic documentary called "America Unchained", about one Brit's quest to cross the US without giving any money to "the man," I was asked if I wanted to write a guest post at Zen Habits. Did I? You bet I did. And I had just the topic.

Here's the introduction to whet your appetite. If you like what you read, pop over to the excellent ZenHabits and check it out here .

As a young boy growing up in a gray, rainy seaside town in England, I had a fascination for America; maybe even a love affair. America was the land of opportunity, sure. But it was also vastly different and eccentric (in a good way) from state to state. So when I came to the U.S. around seven years ago, I was somewhat disappointed. The roads were lined as far as the eye could see with signs for fast food chains, corporate-ran hotels and big, bad gas companies. Where was the other America? Had she disappeared?

I'd also like to take this opportunity to thank Leo at ZenHabits for letting me write a guest post. I read ZenHabits frequently, so being given the chance to write a post was something I jumped on. And hey Leo, my wife's from Guam...gotta love breakfast at Shirley's.

This article is from Paul Michael of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: