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Archive for February 2018

The Bad Family Business

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I have some experience with badly run family businesses, both direct and through the stories of people I have known. My mother did not want to work for a large company when I was a teenager, so she went to work for small, owner-managed companies. As I grew up and got real-world experience, I was able to reflect upon how some of her employers qualified as bad family businesses. I can recognize some patterns. I am in a position to make a few generalizations about the bad family business.

Many privately-held small businesses feature some interesting owner behaviors. The owner often does not want to become the next GE; he just wants to be in business, set his own hours and have the business landscape his house. He has no plans to take the company public; he wants to retain control of the company, as his position confers status, power and perquisites. Thus, the behaviors of the firm you study in economics are not the behaviors of this firm, not because the owner is irrational, but because his primary goals are not market expansion or profit maximization.

The owner reasons that, without him, there would be no business, which is usually true. Therefore, in the reasoning of many owners, it logically follows that he is at liberty to impose any policies that please him, or none at all. After all, who signs your paycheck? He may decide he doesn’t have to tolerate disagreement or indulge in wasteful or unnecessary practices such as progressive discipline. If he wanted to put up with that stuff, he could work in a corporation and not have to worry about making payroll. The day he’s sick of looking at you, you can be gone. Don’t count on getting warnings like you would in a large corporation.

The bad small business does not distribute ownership of work. Micromanagement is common. If the owner thinks sentences cannot end in prepositions, no correspondence had better go out the door with a preposition on the end of a sentence. Never mind that his letters look like they were scrawled in crayon; he’s the boss, so he gets to do that. If you, his employee, do not do what he wants the way he visualizes you ought to do it, you may lose his trust forever. This will not end well for you. There is a right way, a wrong way and the boss’s way; guess which two don’t count.

The bad family business overlays a badly managed business with a governance structure heavily dependent upon members of the owner’s family. Of course, this leads to nepotism, but that is not the half of it. The family culture becomes the corporate culture. The interpersonal pathologies of the family move into the company, bag and baggage. The way the other family members deal with the owner — or don’t, as the case may be — becomes the norm for the organization. Any kind of conflict that the family can’t resolve becomes a kind of conflict the company can’t resolve. If you can’t relate to the family the way his family members relate to one another, you are not going to fit in.

Periodically, the owner of the bad family business will respond to some problem by bringing in a manager from outside. This manager will have credentials and experience that the owner believes he needs. The manager will start making changes. He will begin to have conflicts with the owner’s family members who participate in the business. He will believe that, because he was brought in to fix a problem, that he has the political clout to prevail over the family members in a conflict. Usually, the manager will be dead wrong. He will go into the owner’s office for a showdown, and come out unemployed.

It is easy to understand how these managers go wrong. They allow themselves to believe that, because the big boss complains about something, that his top priority is to get that something fixed at any cost. But when the cost reveals itself as family members losing influence, the big boss recoils. Blood is thicker than water.

The kids may not know how to build a sales force. They may not know the difference between debits and credits. They may not know all sorts of business stuff. But they know how to push Daddy’s buttons. They’re really good at that, having practiced all their lives.

On 20 January, 2017, the Executive branch of the US Government was taken over by a bad family business. It was a hostile takeover. Nobody wants to hear how things used to be done. Have you not heard? The people who did things the way they used to be done are losers. There is a new President and a new set of norms.

Donald Trump, Jr., Ivanka Trump and Jared Kushner are family. Steve Bannon found out what happens when you clash with the kids. He won a few rounds, such as with the Paris Climate Accord, but ultimately he was cut off at the knees. Now, it looks like John Kelly, the White House chief of staff, is on the road to ruin.

Sources tell the news network that Kelly believes Trump is blurring the lines between first daughter and senior adviser to the president.
Kelly has reportedly said privately that the first daughter is “playing government,” and referred to her child tax credit as “a pet project.”
— Julia Manchester, The Hill, 27 Feb [http://thehill.com/homenews/administration/375746-kelly-irked-by-ivankas-trip-to-olympics-report]

In badly run family businesses, kids get to have pet projects. You, who are outside the family circle, disparage them at your peril.

Even better: Jared Kushner received a downgrade to his security clearance, from top secret to secret [http://www.businessinsider.com/jared-kushner-bad-day-security-clearance-manipulation-2018-2].

Jarvanka, as the two are commonly known, are reported to be preparing for a “death match” with Kelly [https://www.aol.com/article/news/2018/02/28/trumps-family-is-reportedly-furious-with-john-kelly-and-the-sides-may-enter-a-death-match/23373149/]. I have seen this movie before. It does not end well for Kelly.

The employer generally gets the employees he deserves.
— J. Paul Getty

So does a President.

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Written by srojak

February 28, 2018 at 6:43 pm

What Do You Want from Your Government?

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Years ago, in The Economist, I saw this list of positive attributes of a government:

  1. Stability: the government has the ability to provide continuous governance over time. This is not to say that the individual people in power stay in power, but that there is a continuity of principle over time even as people doing the governing shift in an out.
  2. Security: the government protects its citizens and their property from violence:
    1. Caused by internal agents, such as criminals and criminal organizations;
    2. Caused by external agents, such as foreign governments.
  3. Predictability: the government provides a legal structure that offers citizens understandable and predictable consequences of their actions. You take this action, you get that outcome. You can know it in advance and plan accordingly.
  4. Accountability: everyone in the government is either directly answerable to the citizens through election or reports up a bureaucratic structure to someone else who is directly answerable to the citizens.
  5. Transparency: the citizens can see into operations of the government. We can find out what the people who govern us are doing so that we can decide whether or not we want that to continue to be done.

This list is a starting point. You may believe something is missing. Perhaps justice leaps out at you; we can discuss that, although we also have to discuss what we mean by justice.

A libertarian minimalist government and a highly paternalistic welfare state could both provide these five attributes. So there is also a need to discuss the degree of scope the citizen has to determine her own life results, and this is not present in the foregoing list.

Nevertheless, we can take these five attributes and get a good argument going by simply trying to prioritize them. They require tradeoffs. For example, security and transparency are inherently opposed. Agents who would do harm to citizens thrive on transparency, so that they can know what the government security apparatus does. However, there has to be enough transparency to support accountability.

Similarly, stability, predictability and accountability often oppose one another because the polity itself is not predictable. So if the government is to offer stable and predictable protections to minorities within the polity, this may aggravate the majority. A government that is totally accountable to the people may not uphold these protections.

Politics

Politics is the process by which we come to enough collective agreement to make decisions that affect everyone in the collective. Nationally, we have to determine how we want to make the tradeoffs among these five attributes. The people in positions of responsibility in the government have their own ideas about them; do those ideas align with ours? If not, what are we going to do about it?

Due to our Enlightenment heritage, the word politics has a smelly connotation. Bill George, who teaches at Harvard Business School and used to run Medtronic, says we ought to put country before politics. This is a common enough sentiment. What would it mean in real life?

If we were all wired the same way, we would all agree on what we ought to do as a country. We would all rank order the five attributes above the same way and set the same tradeoffs. We would all define justice the same way. We would all want the same relationship between the individual and the state.

Many Enlightenment thinkers hoped that progress would reveal optimum answers to these questions. Knowing these answers, there would be no need for politics, because we would rationally agree on how to proceed. In 1878, Friedrich Engels wrote in Anti-Dühring:

The first act by virtue of which the state really constitutes itself the representative of the whole of society — the taking possession of the means of production in the name of society — this is, at the same time, its last independent act as a state. State interference in social relations becomes, in one domain after another, superfluous, and then dies out of itself; the government of persons is replaced by the administration of things, and by the conduct of processes of production. The state is not “abolished”. It dies out.

This is the origin of the idea of withering away of the state. We all agree on what to do, so “the government of persons is replaced by the administration of things.” Government is superfluous, because all rational citizens share a common agreement of what the entire collective ought to decide.

However, since we do not observe the promised convergence to a common agreement, this is not achievable. There is not going to be a universally shared understanding of how difficult societal tradeoffs ought to be made. What the rationalist program actually calls for is to take the politics out of politics.

The Rehabilitation of Politics

Instead, I am calling for engagement with politics. I am asserting that there is a right way and many wrong ways to be political, just like there is a right way and many wrong ways to be religious.

A person who walks around all smug and sanctimonious because of religious convictions is doing it wrong. A person who says that any religion is just as good as any other religion is also doing it wrong: in Roman Catholicism, this is the sin of indifference. We are called to believe that we are right in our beliefs, without asserting that all who believe otherwise are necessarily evil.

All they ask, we could readily grant, if we thought slavery right; all we ask, they could as readily grant, if they thought it wrong. Their thinking it right, and our thinking it wrong, is the precise fact upon which depends the whole controversy. Thinking it right, as they do, they are not to blame for desiring its full recognition, as being right; but, thinking it wrong, as we do, can we yield to them? Can we cast our votes with their view, and against our own? In view of our moral, social, and political responsibilities, can we do this?
— Abraham Lincoln, “Cooper Union Speech“, 1860.

Similarly, in politics, there is a balancing act to be done to hit the sweet spot between the strident “We’re right; they’re wrong” and the spineless “Who am I to have an opinion?” The Cooper Union Speech is my favorite Lincoln speech because I find that he did hit that sweet spot. He recognized that there were Americans who believed as fervently that slavery was right as he believed it was wrong, without rendering those who disagreed stupid, evil or crazy, and at the same time without a misguided call to compromise on principle. He was ready to compromise politically as far as leaving slavery in place in the states that already allowed it, because he foresaw secession and civil war if this was not done. But, in principle, there could be no compromise; we were either going to have legalized slavery in this country or we weren’t. In fact, we could not avoid secession and civil war. Four years later, Lincoln would come to see the war as a divine judgement on a nation that had tolerated slavery.

I believe that this is what We the People have to do. We have to be able to have reasoned discussions with those who disagree with us. We can settle our differences with words or with bullets. There is no third option.

We believe that political power is derived from the consent of the governed. If the governed cannot even have an intelligent conversation among ourselves with those of us who differ in our beliefs and priorities, how can we consent to anything?

Written by srojak

February 3, 2018 at 4:42 pm