Skip the MBA

I went to the mat a couple times arguing that going to college is not a bad idea (if you are good at academics and want to go), mostly in response to Bearing's post secondary education series. (Unfortunately, just as we were about to get into it about college with Erin and Mark when they came to visit, we all had to stop and put the kids down, and then we never got back to the topic.) However, I think one has to be a lot more cautious about one's decision to go on to a graduate program, especially in an area that's strictly credentialing such as an MBA. Megan McArgle has a post up that I much agree with making the point that getting an MBA is usually a waste of money if you're not getting it at one of the top schools:

The article is crammed with sad anecdotes. But when you dig into it, I'm not sure how much of this is news. Almost all the discussion is of third-tier regional schools. It was a commonplace when I was applying to business school, way back in 1999, that there wasn't much point in getting an MBA unless you could get into a top-tier school; the degree simply wouldn't repay the investment of time and money. That clearly hasn't changed, but I'm not sure there's much evidence that it's gotten worse, either--except in the sense that more people are getting degrees of questionable value.

For graduates with minimal experience—three years or less—median pay was $53,900 in 2012, down 4.6% from 2007-08, according to an analysis conducted for The Wall Street Journal by PayScale.com. Pay fell at 62% of the 186 schools examined.

It's not unusual for starting pay to fall during a weak economy. What this really highlights is what business schools rarely tell you when they're selling you on their school: students with weak experience and lower-tier degrees aren't getting the six figure salaries that people associate with an MBA. Students with more experience do better--but need the credential less. The high-paying employers that people hope to wow with their degrees don't recruit very far down the prestige ladder....

The last two decades have witnessed an aggressive expansion of graduate programs, particularly in areas like business and law. Schools love them because they're cash cows: low cost, high price. But they don't provide good value to their graduates. When young people ask me whether they should get an MBA, I give them the same advice that I got in the late 1990s: unless you can get into a top 10* (or have a very specific job that you know you can get by attending a regional program), then don't. You're too likely to end up with massive debt and no very good prospects for paying it.

Hell, I did go to a top school, and nonetheless, through a series of unfortunate events, faced a long spell of unemployment that ended when I accepted a job that left me personally rewarded, but financially somewhat desperate. And there are many, many more people in that situation whose degrees come from third-tier schools with little in the way of name recognition or alumni networks. That's why I always urge people to think very, very hard before they decide to go to professional school. It was no fun at all paying high five-figure debt on a low five-figure salary. I don't recommend the experience to anyone else.

I have a bit of a prejudice against MBAs since I move in a career niche where many of my peers have them, and so, reactionary that I am (and certainly past any point of being able to go back and get an MBA) I tend to deprecate MBAs in favor of experience. (That, and there's nothing quite as annoying as a straight-out-of-B-School new hire who is convinced that "how we learned it in business school" is invariably more important to know than how things work in one's individual company.)

However, prejudice aside, this point about only going to business school if one can get into one of the very top ones definitely aligns with my experience. Perhaps the only exception would be if your company is willing to pay for you to get an MBA at a local second or third tier school. If all you're having to lay out for the degree is some time and effort, getting the credential at the company's expense may be worth it to you.

All About Pricing: Price Discrimination

I thought it might be interesting to do an occasional series on how pricing works -- since it's what I do all day and I (clearly a biased source) find it interesting. I flatter myself this might also be educational in that many people don't think much about how pricing works in making a business successful.

One of the important-but-illusive concepts that I deal with a fair amount as a pricer is price discrimination. This is a term which different people use in different ways, and on its own it sounds a bit scary (we don't normally think of "discrimination" as something we want a business to be doing) so I'll define it roughly here at the beginning and then discuss some examples: Price discrimination consists of selling similar or identical products or services to different customers for different amounts of money.

Why would you want to do that?

To be successful, a business needs to meet both its fixed costs and the cost of the goods it sells. Take a restaurant. The fixed costs include rent, the kitchen and wait staff, utilities, advertising, etc. The costs of the goods it sells are the costs of the food ingredients used to make meals for its customers.

If the restaurant gets really, really busy, it might need more staff, but most of the time the cost of keeping the restaurant open for business are the same whether 100 people or 150 people come in for lunch.

So, you're running Egan's Irish Pub and right now your business is just breaking even. It's worth it to you to offer lower prices to new customers if that would increase your traffic, because your fixed costs are already met. But you don't necessarily want to discount all the business that you already have, because then you might find yourself no better off. What do you do?

Well, you could offer a coupon. If you get the coupon mostly to people who aren't already your customers, you increase your sales and the lower price those additional customers are paying is okay because you only have to meet your cost of goods on those sales: your fixed costs are already covered.

You could also offer time dependent discounts. The "happy hour" is a classic example of price discrimination. You pick of a time of day when not many people normally come to your business and offer people who come at that time a special discount. People who really care about getting a good deal will come at that time, while customers who care more about convenience will come at their usual times.

While not a classic example of price discrimination, certain types of product differentiation can be motivated by price discrimination-type thinking. The idea here is to offer one version of your product for value conscious customers, at a lower price, in order to win their business, while steering other customers to a very similar, higher priced product.

In addition to helping businesses make money, there's an odd sort of social justice angle to price discrimination as well. While the purpose of the strategy is to help companies make more money, the result can end up being that those who are truly short of money (and willing to make certain trade-offs as a result) get to pay less for virtually the same product, while those with more money pay more.

Changing Jobs

So I'm leaving my job and heading for a new one.

Getting to this point has taken so much work, that it's only now (as I start writing up "everything I do" for my manager to make what I expect will be a futile attempt to get someone to do it in India, as goodbye parties are scheduled and people drop by to ask in hushed tones, "Are they hiring any other positions?", as I find myself doing monthly tasks and thinking, "This is the last time.") that I find myself gradually adjusting to the idea that in two more weeks I won't be here anymore.

Although I've changed roles a number of times, I've worked at the same company (mostly in the same building) for almost seven years now. At thirty-one, that's a rather major portion of one's life. When we moved out here and I started at the company, I was 24 and had two kids under two. A lot has changed since then.

At least in our modern world, a job is seen as a pretty transient thing. My employer could have told me I was out of a job at any time. Although the company tends to give a couple months' severance, that's not at all required. And similarly, while I've given them the traditional two weeks notice, in theory I could have simply said, "So long and thanks for all the fish," and walked out the door immediately.

And yet, for all that either could have, in theory, walked away with no notice at any time, in fact the bonds between employee and company run deep, perhaps oddly deep given that it is "only a job". Work friendships may not always be the deepest, but we spend far more time with co-workers than with most other friends. And even when a job seems three parts drudgery to one part interest, it becomes part of our daily mental landscape. The longest I'd worked at any one company prior to this was about three years, and even there I to this day remember a great deal about personalities, products, and daily routine. I have the feeling that this company has sunk even deeper into my consciousness.

As a result, the whole thing still has a certain air of unreality. It often throws me when large changes in life come quickly. Somehow, the fact that the offer of the new job came so quickly, a ten minute call outlining compensation, start date, etc., makes it seem much less real than the long process of talking to various employers, interviewing, etc. It probably won't be until several seeks into the new job that it finally sinks in that this really is where I work now.

On The Difficulties of Career Feedback

The main reason I've been fairly quiet on the blog the last couple weeks is that I'm currently facing the full brunt of some new team management responsibilities at work. When I'm adjusting to new or larger responsibilities, I often find that (aside from having very little free time) I find it difficult to give much mental energy to anything else. Books sit unread, blog topics cease to come to mind, etc.

One of the things that's been keeping me particularly busy lately is preparing end-of-year performance reviews. Knowing how frustrating it can be to get a cursory written review from the manager you've only had for a couple months (which in this case, is me) I want to make sure that I give people thorough and fair feedback.

The process, however, brings up some basic contradictions in my deeply held assumptions and ways of dealing with people. In the employment sphere, I generally find myself assuming, "Most people are able to do well if they are given the opportunity (and appropriate guidance on what they're supposed to do and resources to do it with) if they apply themselves." And yet, in my personal interactions with people, I contradictorily assume, "It is generally not possible to change people, and causes unnecessary conflict to try."

Here's the problem (or as we say in corporate speak, challenge): For various reasons, certain types of skills and personalities are valued more than others. So, for instance, say that someone is the sort of person who is very good at routine. He is willing to come in day after day and do the same thing, and do it right. But he is not the sort of person who comes up with suggestions on how to change processes, or who will proactively go find things to do if he's not given tasks. Such a person can be valuable in certain slots, but unless he "develops" by becoming the sort of person who develops and implements new or improved businesses processes, shows initiative, etc., he will always get middling performance ratings, low raises, and will not be promoted.

So, do you provide such a person with feedback about how he needs to step up and be more innovative? Or do you just leave him alone? My social instincts tell me that you simply accept people as they are and work around any limitations or annoyances that may come with them. You don't address negatives, because that causes conflict. But implicit in the modern workplace is the idea that everyone can and should improve. And given that my own experience is that I am pretty successful in improving and innovating within any given role, if I write off people's ability to do this I'm implicitly saying, "I'm able to do the things which the company environment here values, but you're not." Which is not the sort of thing that "all people need is opportunity" types of people like me want to admit. It feels to much like saying, "You're not as good as me."

Not only can providing feedback about things people can't change (or may not be able to change) contradict one's deeply held assumptions, it can also cause significant personal pain. A couple years ago, when it was annual review time, I ran into a woman on another team who was close to tears after getting her annual performance feedback. One of the major pieces of feedback she's received from her manager essentially boiled down to, "A lot of the people on the team really don't like your personality. Please act differently." She didn't know what to do, and was deeply offended. And, of course, the most difficult thing about the whole situation was that the manager was right: she had a certain manic-kindergarten-teacher approach to doing things which was annoying and unprofessional. But what could you do? That's simply the way she was, and if people didn't like it they should have considered that when they hired her.

It's Not Subversion, It's The System

I ran across this Boston Globe article about a Boston College professor who believes she has successfully identified a new form of civil disobedience, or as she terms it "economic disobedience."

The interview changed the way Dodson talked with other supervisors and managers of low-income workers, and she began to find that many of them felt the same discomfort as the grocery store manager. And many went a step further, finding ways to undermine the system and slip their workers extra money, food, or time needed to care for sick children. She was surprised how widespread these acts were. In her new book, "The Moral Underground: How Ordinary Americans Subvert an Unfair Economy," she called such behavior "economic disobedience."

I'm perplexed as to why Prof. Dodson is so surprised by this. Looking back over the jobs I've worked in the last ten years, ranging from hourly work just above minimum wage to a family owned business to the corporate world, every company I've worked at has seen managers or owners making reasonable exceptions for people in order to help them out: Letting people leave early without clocking out; not officially making someone off work when they're home with a sick kid; giving left over food, supplies, etc to people who are known to be hard up; etc. This happened at least as much at the small, family-owned company I worked at for a couple years, where it was clearly not a case of managers "subverting" a system in order to help people out, since it was the owners themselves granting exceptions and giving people extras.

What the supervisors here are doing is, technically, breaking the rules of giving away resources that are not theirs. Too much of this kind of thing can be bad for the company, and if a manager is constantly putting people down as working hours they didn't work, upper management will probably eventually notice and be upset about the waste of resources. (So might be the workers who actually work all their hours.) However, it's fairly normal for managers to assume, rightly or wrongly, some of the prerogatives of owners in regards to granting exceptions and handing out favors. And indeed, it's arguably not just good for the workers but good for the company if managers make reasonable exceptions at times. The working mother who's given unofficial time-off to take a sick kid to the doctor is likely to be a harder and more loyal worker as a result than she would be if her boss refused her time off or held back wages for the time missed.

Good supervisors know that if they take good care of their workers, their workers will be more likely to watch out for the good of the company, putting in extra hours when necessary and letting them know when they see problems or things that could be improved. Contrary to the populist imagination, being an inflexible jerk is generally not good for business.

Credit Cards and Market Intelligence

The other day I ran into a link to this NY Times article about credit card companies using information about what people buy to attempt to "profile" customers and see who is likely to default on their consumer debt. I'm not sure if I'm particularly cynical or hard hearted, but I don't find myself as shocked as I gather the author is that credit card companies would do this. Credit card debt is unsecured, and so if someone declares bankruptcy, they often get almost nothing. Because of this, credit card companies are often willing to write off 50% or more of what someone owes in order to keep them from declaring bankruptcy.

Clearly, at that point, they face a huge amount of risk. They make up for that with interests rates much higher than you'd pay on secured debt, but even so I find it hard to blame them for wanting to gather what information they can based on customer activity to decide whether to extend someone more credit, or rein them in.

John Mackey on Capitalism and Running a Business

Whole Foods CEO John Mackey attracted quite a bit of ire a few months back when he wrote an editorial for the Wall Street Journal in which he advocated that Obama and the congress consider an approach to health care reform similar to the health benefits which Whole Foods provides its employees (centered around high deductible coverage and health savings accounts.) Within days, several progressive sites were calling for boycotts of Whole Foods, seeing Mackey as giving aid to anti-Obama forces. Mackey himself is somewhat bemused by the firestorm his editorial caused.

"President Obama called for constructive suggestions for health-care reform," he explains. "I took him at his word." Mr. Mackey continues: "It just seems to me there are some fundamental reforms that we've adopted at Whole Foods that would make health care much more affordable for the uninsured."

Though he's not gunning to cause any more controversies, Mackey has an interesting weekend interview in the Journal where he talks, among other things, about his philosophy regarding capitalism and business, and how it's changed over the years since he founded Whole Foods with $45,000 in friends and family-raised seed funding in 1978.

"Before I started my business, my political philosophy was that business is evil and government is good. I think I just breathed it in with the culture. Businesses, they're selfish because they're trying to make money."

At age 25, John Mackey was mugged by reality. "Once you start meeting a payroll you have a little different attitude about those things." This insight explains why he thinks it's a shame that so few elected officials have ever run a business. "Most are lawyers," he says, which is why Washington treats companies like cash dispensers.

Mr. Mackey's latest crusade involves traveling to college campuses across the country, trying to persuade young people that business, profits and capitalism aren't forces of evil. He calls his concept "conscious capitalism."

What is that? "It means that business has the potential to have a deeper purpose. I mean, Whole Foods has a deeper purpose," he says, now sounding very much like a philosopher. "Most of the companies I most admire in the world I think have a deeper purpose." He continues, "I've met a lot of successful entrepreneurs. They all started their businesses not to maximize shareholder value or money but because they were pursuing a dream."

Mr. Mackey tells me he is trying to save capitalism: "I think that business has a noble purpose. It's not that there's anything wrong with making money. It's one of the important things that business contributes to society. But it's not the sole reason that businesses exist."

What does he mean by a "noble purpose"? "It means that just like every other profession, business serves society. They produce goods and services that make people's lives better. Doctors heal the sick. Teachers educate people. Architects design buildings. Lawyers promote justice. Whole Foods puts food on people's tables and we improve people's health."

Then he adds: "And we provide jobs. And we provide capital through profits that spur improvements in the world. And we're good citizens in our communities, and we take our citizenship very seriously at Whole Foods."

I ask Mr. Mackey why he doesn't collect a paycheck. "I'm an owner. I have the exact same motivation any shareholder would have in the Whole Foods Market because I'm not drawing a salary from the company. How much money does anybody need?" More to the point, he says, "If the business prospers, I prosper. If the business struggles, I struggle. It's good for morale." He hastens to add that "I'm not saying anybody else should do what I do."

Well, that's not exactly true. Mr. Mackey has been vocal in his opposition to recent CEO salaries. "I do think that it's the responsibility of the leadership of an organization to constrain itself for the good of the organization. If you look at the history of business in America, CEOs used to have much more constraint in compensation and it's gone up tremendously in the last 30 years."
emphasis added

Working in an area of business (pricing) which management traditionally turns to when trying to eke more revenues or profits out of a business that is not doing as well as they'd like, the bolded point is something of which I'm particularly aware. Tools such as pricing can be used to optimize a business, but (contrary to the belief of some executives) you cannot make people want something they don't want simply by pricing it right -- or indeed by any of the other "marketing magic" available in business's bag of tricks. At the end of the day, the way to have a sustainable, successful business is to provide people with something they need or want. While making a profit in a business is a primary reason for its existence (just our for any working person their paycheck is a primary reason why they show up) the only way to make profits achievable is to provide something that others value. And while it's possible to do this while caring only about the profits (or the paycheck) you're generally going to be most successful at it if what you really care about is providing that service profits are simply the way you measure your success.

When businesses (or individuals) start thinking about how to make profits without thinking about how to provide people with something they will actually value, they usually are undercutting their ability to do either in the long term.

A Brief Pricing Exercise

or: What does Darwin do all day?

I made a quick run over to the grocery store at lunch time yesterday to pick up coffee for work, and I was pleased to find that the brand of ground coffee I normally buy was marked down from 7.99 to 5.99. Not one to waste an opportunity, I bought two.

Now in a sense, this is exactly the sort of behavior that pricers try to cause, but it also underlines some of the pitfalls of my job, and the reason why pricing is a sufficiently complex science that it has a bit of the art to it as well.

A 25% price drop caused me to buy two bags of coffee instead of one. Doubling unit demand by dropping price 25% isn't bad, though clearly no everyone would have bought two. But here's the trick: The fact I bought two bags of coffee won't cause me to drink coffee any more. (Some suspect if I drank coffee much more than I do already, one of my organs would fail anyway.) So in my case, this sale was actually a net loss for the coffee makers and the grocery store. I paid less for the same amount of coffee that I would have drunk anyway, and now they've foregone sales at full price a couple weeks down the road in order to get sales at lower profit margins now.

However, constant customers like me aren't the real targets of a sale like this -- at least, not if the seller is going to be successful. The real question is: by lowering the price of this coffee, will they win business from people who would have otherwise bought Starbucks or house brand gourmet coffee, or even Maxwell House or Community Coffee. If the lower price brought customers to the brand who would normally have bought something else, and if those customers love the coffee and decide to keep buying it even when it goes back to full price, then it's clearly a win for the brand.

At the end of the day, success for the grocery store is if they have greater revenues and greater profits overall -- though achieving this in the long run may mean sacrificing one or the other in the short term. They can do this one of three ways:
1) Have more customers come to the store.
2) Have the same customers buy more things.
3) Have the same customers buy more expensive things.

My guess is that 1) is not in play here -- I can't see gourmet coffee bringing in people who don't normally shot in the store, and I don't think this offer even made the circular. However, you'd want to check your customer count stats just to see.

I fell into 2) by buying two bags of coffee instead of one, but what they really would need is for people who don't normally buy coffee to buy some, which is unlikely. Most people either drink coffee or don't, though occasionally you have shifts in these trends. Arguably, the Starbucks phenomenon has created more coffee drinkers than there were before. For this one, I'd look to see if aggregate coffee demand for the four weeks starting with the week of the discount was up -- and whether any increased demand translated into increased profitability, or if the 25% discount ate up all the profits from the increased volume.

The gold in this case is probably 3). Does this kind of discounting turn drinkers of cheap/nasty coffee into drinkers of more expensive, quality coffee? (Bias showing through here...) To determine this, I'd look at whether there was a move from cheaper coffee to more expensive coffee during the discount, and whether some of that move proved to stick in the following weeks. If so, doing such a discount every 6-8 weeks would be a good way of converting people to the higher quality product by allowing them to try it at lower cost. (You wouldn't want to run it more frequently than that, or people would start refusing to buy at full cost and waiting for the discount, turning your high price product into a medium price product and possibly turning the entire brand into a money loser.)

And now... I have to go price.

Unreasonable Compensation

With people focused on the economic downturn, many have found it a good time to give a little extra thought to whether other people are making more than they ought to. The president has spoken out several times against "excessive compensation" of executives, and a number of people have floated the idea of adjusting the top marginal income tax rate to effectively cap total compensation at ten million dollars a year. MZ tackled the question somewhat humorously here.

Beyond question, $10 million is a lot of money. Most of us will never see anything like that much money, and so it seems entirely reasonable to demand: Why should anyone be paid so much? What's so special about CEOs and actors and baseball players that they deserve tens of millions of dollars? Aren't they running off with the money that we should be getting instead?

I certainly wouldn't claim that executives are not often paid more than they are worth. A board of directors is still a group of people with emotional commitments (including wanting to assure themselves that they made the right pick in choosing the current CEO) and they will certainly not always do what is in their own best interest. Though we may be comforted that in a free economy the incentives are in place to automatically punish them for not doing so.

To look at an example of the impact of high executive compensation, I consulted the handy Executive PayWatch Database which my friends at the AFL/CIO put together for me. I picked Hewlett-Packard Company to look at. CEO Mark Hurd made $34,031,021 in total compensation in 2008. This, the AFL/CIO helpfully calculates for me is the same as 836 years worth of salary for the average worker. Should we be outraged?

Availability Replaces Ownership

I bought a DVD the other day, something which was mildly notable in that I almost never buy any DVDs anymore. Once upon a time I had a movie library instinct which worked on nearly the same scale as my book library instinct. I had a steadily growing collecting of VHS and later DVDs of the sort of movies (many of them either foreign or obscure) that I liked and yet could never find on the shelves of the local Blockbuster or Hollywood Video.

What initially stalled the growth of my movie library was the lack of time for watching non-kid-suitable movies which afflicts many tired young parents, but over the last couple years we've gradually reacquired our evening leisure time (though sometimes only at the expense of many tears when 8pm rolls around and the monkeys are marched upstairs) and started to watch movies or TV shows on DVD 1-2 nights a week. And yet now we almost never buy movies, and the ones we do have are sealed up in boxes in the garage.

The difference is Netflix.

Since Netflix has practically every movie on DVD available on three days notice, it's become very easy to overcome my library building urge when it comes to movies. In essence, having access to Netflix becomes a substitute for owning the movie, and so the only movies I've picked up in the last several years have been movies that we'd be likely to want to watch all the time (some kids movies, and a few movies that we often feel like crashing with when tired and stressed.)

This strikes me as an interesting example of how a community resource can replace the need for people to own things individually. No one has restricted my ability to own movies, but having been provided (at a fairly nominal monthly cost) with a resource that replaces (and expands on) the benefits of building a movie library, I simply have no desire any more. For those who worry greatly about the impact to society and the environment of everyone wanting to own more things, Netflix is perhaps a good example of the sort of thing which declutters the world while actually pleasing people more.

The challenge is, many of the suggestions for reducing consumption which are pressed upon us are significantly inferior to the more consumption heavy alternative. Public transit is all very well, but for many of us it simply doesn't go where we want to go when we want to go there or is in fact more expensive in absolute terms than driving. One may appreciate the virtues of the old urban neighborhood with everything near by, but not enough to want to cram a family of six into a small flat. Etc.

But if one can come up with a collective resource which actually provides a better experience than personal ownership, people will quite happily jump aboard.

I find it had to imagine ever dropping my book acquisition instinct, but I imagine that if I had truly easy access to a library large enough or fluid enough that I could reliably find nearly any book that I wanted in it, I would drastically reduce my book buying activities. (As it stands, our local public libray is mostly only useful for children's books, very basic non fiction needs, and fairly common or best-selling fiction.)

Those Wicked, Wicked Corporations

On a lark, I went out with some young friends last night to catch a late showing of Transporter 3, which was about as much of a goofy/fun action movie as one would expect. While various chases and fights were fun to watch, the plot itself was one of those confections which implodes on the least scrutiny. Particularly interesting to me, however, was the role of the Evil Corporation.

You would think that the rabbit like timidity of office park culture would not provide much grist for the action movie mill. Not so in Transporter 3. When the American-based Eagle Corp. is in danger of having their request to dump eight cargo ships a year worth of toxic waste in Ukraine, they kidnap the Ukrainian prime minister's daughter and threaten to kill her if he doesn't sign their contract. This leads to lots of tense staring at the contract with pen in hand, and plenty of black Audi and Mercedes sedans speeding around the continent -- as well as the occasional shoot out.

You can, of course, picture how this would go.

[Interior: Eagle Corp. conference room where waste management directors are in conference.]

Evil Corporate Man One: Report on the Ukrainian waste management plans?

Evil Corporate Woman: Unfortunately the Ukrainian Prime Minister has decided this is the time to boost his environmental cred in the EU. He's broken off negotiations and is planning to give a speech to the EU denouncing environmental destruction and explaining the need to preserve the planet for his daughter's generation.

Evil Corporate Man One: This kind of obstacle makes me feel like using non-board-room language. I'm open to creative suggestions.

Evil Corporate Man Two: The Prime Minister's daughter is a big player on the party scenes. Let's drug her, rig her with an explosive bracelet, and send her out across Europe in a fancy black car with an underworld delivery man while telling her father that he'll never see her again unless he signs a contract allowing us to dump even more waste than originally planned.

Evil Corporate Man One: That sounds like a reasonable suggestion. Any objections?

Evil Corporate Woman: I'd like to run your underworld driver choice by HR to make sure that they agree we're engaging in fair hiring practices. And of course you'll need to send the revised contract over to legal for review.

Evil Corporate Man One: I'll make a note of those action items. Evil Man Two, could you run our new scenario by the folks in PR to make sure they don't see any corporate image problems resulting from kidnapping and intimidation. Evil Woman, could you contact our negotiation team and ask if threatening the PM's daughter would result in difficulties in future negotiations?

Evil Corporate Man Two & Evil Corporate Woman: Got it.

Evil Corporate Man One: All right. Thanks for putting some good, outside-the-box thinking into this, team. I'm glad to see you're all living up to corporate value number three: dealing with ambiguity. That's all for today. I'm giving the last five minutes of our meeting back. Remember that year end reviews are coming up and you'll want to update the results in your performance plans. We can discuss that in our one-on-ones next week.

Want an Analyist? Call an Indian

This week we've been interviewing candidates for a new slot on our team at work (though due to budget constraints this is an "internal only" hire.) The resumes we got from HR which fit the job requirements totalled four Indian immigrants and one Pakistani. Not a single US born or educated candidate among them.

So far as I can gather, this is not unusual in technical areas. (And although we're a marketing team, this is a slot for a heavily analytical person.) And while fifteen years ago the joke was, "If you want to be an engineer, learn Japanese." These days, I guess it would be, "If you want to work with computers, learn Hindi."

While some of this has to do with India currently providing the combination of a business friendly climate, comparatively low wages and a good educational system, from my conversations with Indian co-workers it sounds like it's also the result of India actively fostering a highly technical citizenry over the last 30 years. Based mainly on standardized tests (and to some extent on student preference) students are put onto various pre-professional tracks at in junior high or high school, with the coveted areas being medicine, accounting and technology. Very, very few people, I'm told, go into the arts or humanities, and the idea of taking a college majors that doesn't have an obvious target career is very alien to my Indian co-workers.

On the basics, my co-workers have an outstanding education. Their math skills are better than those of most US-education people I know, and their reading and writing are also generally better -- though with a few oddities that are the result of trying to bridge the gap between Indian and American English. (And while their usage can be odd, their grammar and spelling are generally much better than those of us from the US.)

But while I admire the overall emphasis that Indian society apparently puts on education, I find the idea of an educational system which is entirely based on preparing people for careers (and thus gives little time to history, literature and philosophy) rather dispiriting. Certainly, we do little better in the US, where our humanities departments are too often given over primarily to political activism, and a lot of people manage to graduate college with little familiarity with Western Culture. Still, I would like to see such enthusiasm for learning focused on the full range of subjects, not just ones relevant to specific careers. And if my own experience is any gauge, having a primarily liberal arts education is not a barrier to pursuing a very analytical career.

Is the Corporate Ladder Dehumanizing?

One of the blogs I get a great deal of pleasure from reading is Video Meliora, written by TS, this because he is a creature of wide ranging interesting and enjoyable prose style.

A couple days ago, he linked to a post by ZippyCatholic about how life in the corporate world demands constant increases in productivity: up or out. Or to use Zippy's metaphor: Work is a treadmill, and the speed doubles every ten years.

Zippy is in turn writing about a post on What's Wrong With The World by Lydia McGrew.

McGrew is a homeschooling mother and (I surmise from her introduction) the wife of an academic, and so while she holds to capitalistic ideals, she says she has not been recently familiar with corporate experience. She was, thus, must distressed to have a recent conversation with a friend about "development" as it is demanded in the corporate world:

He explained that in his area there is intense pressure constantly to be changing one's role in the company. This is billed as "developing," "advancing." "Move up or move out," is the basic message. Even if, as does sometimes happen, you do well at your job and would prefer to keep doing it, and even if your immediate superior likes you and would like to keep you in your present position, the superior himself comes under pressure for not "developing his people." Ambition is treated as worthwhile in itself, and its absence as a sign that there is something wrong with you as an employee. Not even a sign, really--as definitionally something wrong with you as an employee. Finding something you like and trying to keep doing it well, perhaps even learning to do it better and better? How passe! How quaint! How regressive!....

I was thus confronted with an image of some previously unknown circle in Dante's Inferno, a place of ceaseless, meaningless motion for the sake of motion. For this motion does not enable the hot dog company to make better hot dogs, nor to make them more efficiently, nor to serve their customers better. It doesn't enable the computer company to make a more user-friendly product or a product that makes its customers' lives better. Such motion from role to role in a company, even if labeled "upward," does not or certainly need not mean that the employee is really growing, is really becoming better at what he does, is really helping his company to do what it does better. It need not even mean that he is doing better at some intangible work such as helping the company to advertise or market its product. On the contrary, he has to keep learning to do something new every few years, just when he was getting wise and experienced in his old role....

In fact, this "move up or move out" imperative makes the old idea of being a cog in a machine look rather pleasant by comparison. Do you want the cogs in your car to keep randomly evolving into something different? Not at all. You might end up with a car that didn't run at all, or that ran much worse than before. If the employees were cogs in a machine, their employers would be grateful that they keep on playing their coggish roles efficiently and well and that they do so indefinitely, making the company like a machine that just keeps on forever running sweetly on well-oiled wheels. If the model of employees as cogs in a machine is modern, it seems to me that the corporate world of "move up or move out" is post-modern, a world where everything must morph for the sake of morphing and where this grotesque and pointless movement is called "growth."

Lydia considers this to be a sort of post-modern heresy in regards to capitalism, and a betrayal of its real ideals, which she describes as "means of people's doing things they want to do, doing them well, and profiting from the labor of doing them well".

Zippy looks at the same problem and sees it as built into capitalism, or at least to the structure of the stock-issuing company:

You can't think of a company as a 'fixed' entity like a car, or even like a cow (a "cash cow" company will get a low market value even if it has high profits, while a growth company will get high market value even with relatively low [current] profits). It is a false analogy. Every 'human resource' in the company is an asset, and assets that do not appreciate in value over time actually lose money for the company when measured against inflation; so they have to be gotten rid of. Just because they store some value 'in place' doesn't mean they are worth keeping around: storing value 'in place' is money in a mattress, worth far less than productive, growing capital....

An engineer who does the same job for forty years is a dead asset. We have to keep putting money into him, usually increasing amounts over time, and get some marginal benefit from his increased experience but no true upgrade in his productivity which translates to the bottom line. Rather he needs to be constantly thinking about how to obsolete himself, replace himself with machines and cheaper less skilled labor so he can move up to the next thing. Upward mobility pressure on employees is not pointless. Growth-oriented ambitious people will do well in an environment of continual upward pressure. People who enjoy what they do and want to do it for the rest of their careers and live like human beings may be made miserable by that situation, but they aren't the ones who will contribute large leaps of growth to the business anyway, so they don't matter. It is more profitable to get rid of them and staff with the other kind of people.

Step back for a second and think about the logic of earning profits from capital. If you invest your money and earn 10% simple non-compounding interest, your money doubles in ten years. At the end of that ten years you can invest it again and earn twice as much for the next ten years. The same asset now has to be twice as productive. This upward pressure applies to all investment assets, and employees are investment assets: it costs money to acquire them and keep them around just like anything else. It is true that many assets depreciate -- lose value over time. Obviously a company in the business of making money (which is reflected in share prices) wants all of its assets to depreciate in real terms as little as possible, and to appreciate in value if possible.

So an employee who produces X today had better produce 2X ten years from now, just to keep up. Why, you ask? Because they can. And if they can't, someone else will replace them. Every asset in a company has this upward bias against depreciation and in favor of appreciation.

Now, I do know about and understand the sort of at times foolish emphasis on "moving up" that is often found in corporate environments. A good friend my parents age who is a very, very good computer programmer ran into a problem some years back where she was essentially told she'd been promoted as far as she could be as a programmer and she would now need to stop programming and move into "management" if she wanted to advance any farther. She pointed out that her work had been key to a number of their very important projects, and said that she wanted to continue programming, though she was open to supervising other programmers as well. In the end, she won, and they created a "senior software engineer" track which allowed her and other programmers who wanted to remain programmers to do what they did best rather than moving into something they had not desire to do.

So yes, the emphasis on development can get a bit silly at times. It is absolutely not my desire to defend the constellation of all the foolish or dehumanizing corporate practices out there, because there are plenty of both, but at the same time I do want to defend the idea of continuing "career development" as not necessarily being dehumanizing -- indeed, as often being humanizing. I think Lydia and Zippy are perhaps missing the sense in which an expectation of increasing productivity is actually good for employees, both economically and as human beings.

Certainly, being made to jump through hoops which one sees no point in can be dehumanizing, but instead of looking at the bureaucratic failure of the "development plan" idea, let's at least look at the purpose behind it. Lydia seems to be assuming some sort of manufacturing/production oriented company, which produces a product, markets it, and ships it out to retailers to sell. It's an easily understood model, so let's run with it. Say a company makes rubber ducks. An earnest young man comes to work for them, and he starts in the factory, inspecting ducks as they come out of the molds and making sure that they are correctly formed. He does well, comes in on time, and is seen as a valuable employee. So after a year, his boss comes to our character and tells him, "You seem like a solid and promising employee. I'd like to see you learn more about the business and move up in the company. You should consider moving up to either running the molding and extruding machinery or overseeing the duck painting. Which interests you?"

The pain! The humanity! Is this poor young man being dehumanized? Is he being forced to do something else just as he was getting truly good at inspecting recently molded ducks? I'd say no. Indeed, if you want your employees to be involved in the company, to understand its workings, and to feel a sense of ownership in what they produce, you want your employees to understand and experience as much as possible of all the aspects of what the company does. Asking an employee to "develop", to move about the company, learn different roles, and move up is an invitation to become more involved in the company, more of an owner -- more of a person and less of a cog.

But say that our young man hates ducks. He cares little for the company other than his paycheck, and he really cares mainly about getting off work on time and going home to read his beloved 18th century Icelandic poets -- a small group, but a worthy one. He doesn't want to know more about the company. He'd prefer to just do the same thing and not exert extra mental effort in learning other roles. After all, he's good at expecting ducks, and since he can do it on auto-pilot he can mental recite Icelandic poetry while he does so. So he turns down the offer and sticks to duck inspection. A few more times over the ensuing months his manager invites him to move up, but always the young man refuses.

Now at this point the manager is getting frustrated. Our young man is sitting in what is generally considered an entry level job, a gateway into the company and a way of discovering new talent. The company believes strongly in hiring at the bottom and promoting from within, but this promising employee shows no signs of wanting to move up, and he's taking up space that could be taken up by someone who does want to learn more about the company and move up. So after another year, the manager delivers an ultimatum: up or out. Do you want to move up, or do you not want to have a future at the company? At this point, the young man becomes sullen and goes off to write long articles on the internet about how capitalism stamps out the love of poetry in man.

Certainly, one can see why the young man, who simply wants to pull in enough of a paycheck to pay for his books of Icelandic poetry without having to devote too much of his mental energy to the process, is dissatisfied. And yet, has the the company really wronged him so very much, or is his manager rightly frustrated at the young man's complete lack of interest in becoming a more integral part of the company? Is it perhaps a matter of the young man simply having selecting the wrong career? And honestly, wouldn't most of us rather have the boss who asks us to move up and learn more about the company (like the one in the example) than one who insists that we remain in one place and doesn't want us moving up?

Now on Zippy's post, I'd just like to point out an aspect of the economics which Zippy doubtless knows, but perhaps overlooked in this particular example: Companies do not have fixed numbers of employees. Yes, an employee can be seen as a resource, and a company does have an incentive to see that resource increase in value over time. (Though the net gain is not as much as he's suggesting, since when your employees increase in productivity 10% every year, you can bet that they're getting paid more every year as well, though probably not 10% more.) But generally, companies that are expanding hire more employees as well. And "increased productivity" is often a matter not so much of all the employees being required to work harder, but of coming up with processes (often via the employees themselves) which allow the same employee to do the same amount or less work, while producing more product. So yes, employees are expected to become massively more productive over time if the company is to grow radically, but that's not just a matter of forcing the employees to work harder. And it's generally good for the employees in that they end up making a good deal more.

Why object to all this? Well, I for one am very glad that I'm not still doing the same job I was when I left college seven years ago. I've enjoyed learning to be vastly more productive and gaining vastly more responsibility than I had seven years ago, and I'm also very glad that I'm able to make 3x what I made back then. That allows me to have a house and a family and to take pretty good care of both. So as for increasing productivity, I'm all for it. Indeed, I would say that increasing one's productivity generally results in less dehumanization in one's work rather than more.