The Evolution of the Employee

A while back, a friend of mine posted this graphic on Facebook. It’s a well-presented picture of the changing landscape for 21^st Century participants in the economy. 

The next to bottom rung of this ladder resonated most with me.  For much of the last 15 years, I have earned compensation by virtue of results I have achieved.  No salary – just commissions or splits of revenue or profit.  So, rather than being paid for my time, I was subjected to the forces of the market without an employer as an intermediary.   

Sometimes it’s more than a little nerve wracking.  I spent five years as an intermediary representing private businesses for sale.  In a good year, I would get five or six paychecks. In a not-so-good year, three.  It’s hard to plan your future when you’re not sure what you’ll be making this year or next. 

On balance I like the flexibility of being an independent contractor.  But, I am a professional earning a good living.  At the other end of the pay scale, there are legitimate concerns.  Our social insurance system has been built around traditional employment.  In the sharing economy, workers are typically independent contractors.  For some, that’s not an appealing arrangement.

The online forum for Uber drivers (UberPeople.net) captured this sentiment from a driver using the pseudonym Honkadonk, "Uber's whole game … is to make everything some weird frayed-line, grey area where nothing is their responsibility. It's ride share but Uber is "everyone's private driver". We're IC but we have rules, answer to bosses, and can be fired. We're illegal cabs but it's okay because we're not cabs. We earn $35/hr except we f---ing don’t.”

Well, he’s right of course and Uber isn’t the only example.  It is the basic nature of corporations to shift liability to third parties.  That’s why we need regulation.

But, how much regulation?  Smartphone apps and the Internet reduce the ‘friction cost’ of doing business.  It’s to everyone’s advantage to benefit from the efficiency that’s created.  The challenge is finding the right regulatory balance so as not to stifle innovation and the disruption that is native to the free enterprise system.

Plaintiffs’ lawyers and politicians continue to try to reinforce the fraying social contracts of the last century.  An article written for the website Hill.com predicts that the National Labor Relations Board will soon tighten rules for independent contractors so that even franchise owners – the millionaires who own McDonalds franchises, for example – would be considered employees. 

We would be better served if we endeavored to place this new reality at the center of our values.  After all, market forces are unstoppable.  It’s not the consumers or the Uber drivers really being hurt by this new paradigm, it’s the entrenched interests of taxi companies, unions and regulators who have the most to fear.

We should be asking this question: how can we decouple the employee safety net of unemployment insurance, workers’ compensation and social security from the framework of full-time employment?  Like it or not, Obamacare has already done so for health insurance coverage. 

The Wall Street Journal’s Lauren Weber has suggested a new status – the‘dependent contractor’ to which we might extend some of the same benefits. 

For their part, Uber contracted with a Princeton economist to analyze the relative pay of Uber and taxi drivers in key markets.  The results show an Uber driver makes an average of $6 per hour more than the average taxi/chauffeur/limo driver.  Here is the chart they have published:

The Huffington Post followed up with an analysis of their own suggesting that the fallacy of Uber’s study is that it doesn’t consider that Uber drivers bear the cost of operating their own vehicles. 

Fair enough.  However, the line of thought that suggests that the sharing economy is sucking jobs from traditional 9-to-5 employment is off-base. 

In a survey of its drivers, 78% reported being satisfied working for the company.  The survey also revealed that many drivers (32%) consider their Uber gig as a fall back while they are looking for a better job.

Would we rather have them depending upon unemployment compensation?

Whatever it is that draws workers to this kind of work and consumers to this kind of service should be embraced not resisted.   The only question…

WHO WILL LEAD?

So, Is It Lonely at the Top or Not?

It isn’t often that a cliché becomes a trending topic on social media.  So, when the old saw “It’s Lonely at the Top” popped up at or near the top of the list, my curiosity was piqued. 

Among the articles I discovered was one on the Wall Street Journal blog titled “FiveReasons Why It’s Lonely at the Top”.  The article was based upon an academic paper written by the authors of the blog post.  One of the authors was Adam Galinsky, a professor the Kellogg School of Business at NorthwesternUniversity, a business school consistently placed in the top 10 in the U.S.

Another – this one in the New York Times -- was titled “Not Lonely at the Top”.  It’s not unusual that the Times and the Journal take a different view of the same issue.  However, in this case, what struck me is that among the authors was none other than – you guessed it – Adam Galinsky. 

What gives?

Well, the first article is based on one’s psychological responses to being in power.  The authors contend that “power perverts, contorts and undermines a number of psychological processes that normally nurture close connections and form the foundation of healthy relationships”.

Among the reasons are that power alters our perception of other people’s generosity (are they being generous or just currying favor?) and, therefore, reduces our ability to develop trusting relationships. 

The alternative view explores how those in power feel rather than their reality.

“Being alone is not the same as feeling alone,” say Galinsky et al. “You can have thousands of friends and feel lonely, or have only a single friend and feel connected. The separation from others — in stature, rank or responsibility — that power confers does not translate into loneliness. In fact, power has the opposite effect on its possessors, alleviating the need to belong and making them feel less alone.”

My own view has been developed less scientifically.  It is experiential (I’ve been a CEO).  It is observational (I work with CEO’s). And, it’s unscientific (it’s just my opinion, after all).

At its core, loneliness at the top is a function of the singular responsibilities that can be performed only by a CEO.  In one of his final works before his death, management guru Peter Drucker outlines them.  Among them are to define the company’s focus on the “Outside”.  If you are running a bank, speculates Drucker, you can focus on many different ways to deploy and leverage your capital – consumer credit, commercial loans, investments, etc. 

Another is to allocate resources to the company’s strategic initiatives.  It does no good for the CEO of an auto manufacturer to conclude that the best differentiator is upgraded infotainment systems if the company’s expertise is building the most powerful engines.  The internal operations must be prepared to deliver on the marketing promise. 

Granted, a CEO can surround himself with professionals – his management team, outside advisors – who can help him make better decisions.  However, the sense of loneliness springs from the fact that there is only one decision maker.

The feeling becomes more acute if the business is small and the CEO is the owner.  Mistakes can be costly and a big mistake can affect your ability to make your mortgage payment or put your kids through college.  No one else in the business feels that kind of pressure.

A good solution for many CEO’s is a peer group.  In a dissertation covering the learning experiences of CEO’s in the healthcare industry, Thomas Chapman concluded “Findings show that CEOs perceive high value in being with other CEOs for one-on-one, informal group interaction, and for having access to a congregation of CEOs in a unique group setting.”

He goes on further to conclude, “elite occupational group members seek other elites for their occupational learning, and exclusive learning groups offer CEOs a safe, confidential set of circumstances and environment that facilitate their learning.”

My experience suggests that learning opportunities are only part of the equation.   The obstacles to moving forward on important initiatives are more often the blind spots that all people develop.  Typically, they center on the need for control or a bias against acceptance of certain critical information.  A peer group can often spot these human frailties quickly and gain commitment to move beyond one’s comfort zone.

Drucker’s commentary is a worthy read for anyone in the study or practice of management and leadership.  But, knowing what to do and doing it are two different things.

WHO WILL LEAD?

FOR SALE: 640 Million Acres

Remember that guy Cliven Bundy?  A few years ago he made headlines by protesting grazing fees on federally owned land in Nevada.  He hasn’t paid them for over 20 years.  The Bureau of Land Management, armed with a court order, showed up to evict his cattle.  He stood in front of the gates, armed with his personal firearms, accompanied by armed supporters, and challenged the Feds to a gunfight.  And, he won the day.  The government backed down.

The standoff over federal grazing fees

He was a conservative hero for a few days until his racist remarks had his political advocates distancing themselves from him.

But, here’s the thing.  He shouldn’t have been a conservative hero.  He should have been a liberal hero.

But, I am getting ahead of myself.

My last post (Let’s understand just what socialism means to us) excoriated democratic socialist Bernie Sanders and, by extension, his supporters and those who advocate his beliefs.  One reader called it a rant.  After rereading it, I had to admit he was right and apologized.  Another accused me of contributing to the demise of civil discourse.  Another mea culpa!

Notably, no one refuted the core of my argument – that capitalism is superior to socialism or even democratic socialism. 

Then I got an email from a friend on the left coast.  It included a link to a New York Times op-ed piece titled “Socialism, American Style”.  The article promotes the idea that state government ownership of real property serves the interests of conservative politicians.  How?  Charging fees for its use raises revenue and enables state governments to reduce taxes.  The authors provide examples of socialist enterprises in conservatively governed states including Alaska, Texas, Nebraska, Wyoming and Tennessee.

Like most punditry masquerading as analysis, the column gets the facts right but ignores alternatives that don’t fit the author’s bias.  What alternatives, you ask.

When commenting on fiscal matters, conservatives are fond of making analogies to household budgets or running a business. 

How’s this for an analogy?

If a business doesn’t generate enough revenue to cover its expenses – the equivalent to governments running a budget deficit – they often sell assets to raise cash.  The federal government owns over 640 Million acres of land or 28% of the area of the United States. 

So, here’s my challenge to conservatives and to conservative politicians, if any are listening:

            SELL THE LAND!

If you believe that private enterprise is the surest path to American prosperity, sell the land.  Private owners will convert it to its highest and best use.  It will generate more personal income for its investors.  They will reinvest it; they will spend it; and, it will boost economic growth.  If you believe in supply side economics, you should expect to generate more tax revenue without raising tax rates if the property is converted to a more economically productive purpose. 

The Federal land is estimated to be worth about $128Trillion.  The practice is most prevalent in the 11 adjacent states that constitute the American west, where the federal government owns 47% of the land. 

Sure, some of it houses military bases and government buildings.  But, most of it – including 85% of the land in Cliven Bundy’s home state – is wilderness.  We could pay off the federal debt with proceeds from the sale of only 15% of it.

Much of it is grazing land of the type that old Cliven, the conservative hero, was using to feed his cattle.  What would happen to that land if it were sold to a private owner?  No one can be sure.  Maybe the new owners would build condos or a health spa and resort.  Maybe they would grow genetically modified corn and feed the world’s hungry with cheaply grown food.

But, if that were to happen, Cliven would be out of business.  What would he do?  Lead a march on Washington?  After all, his government benefits will have been cut.  Aren’t we concerned about social outcomes?

The Wildlife News made this point succinctly, referring to him as “a freeloading, welfare rancher who has an inflated sense of entitlement.”

Like I said, Cliven should be liberal hero.

WHO WILL LEAD?

Let's understand just what socialism means to us

I need to get this off my chest: I'm both upset and amazed that a wacko like Donald Trump is polling second to a mainstream candidate like Jeb Bush in the race for the Republican nomination for President. I'm equally upset and amazed that a wacko like Bernie Sanders is polling second to a mainstream candidate like Hillary Clinton in the Democratic race.

The difference between the two relates to discipline.  Trump says whatever is on his mind with no concern for the repercussions.  (I won’t bother to recount his comments as they are well covered by the press.) 

Sanders, on the other hand, has so far delivered his thoughts with a lot of “message discipline”. 

Sanders is not a Democrat.  First elected to Congress in 1990 and as Vermont’s Junior U.S. Senator in 2006, he has been an Independent who caucuses with Democrats.  He is a self-declared “democratic socialist”. 

We know what the ‘democratic’ part of this definition means.  It means that, unlike the dictatorship that governed the socialist system of the Soviet Union, the electorate chooses its government.  However, I wonder if we know what a socialist is. 

Socialism is an economic system whereby the government owns the means of production.  Citizens lose the right to private property.  Investors (if there are any left) do not have the right to a return on their capital.

Anyone who thinks that socialism would be preferable to free-market capitalism is either ignorant or stupid.  And yet, Sen. Sanders is gaining traction.  What’s happening to the United States?  Have we lost our bearings? 

What we once described as the “profit motive” has been recast as “corporate greed”.  Greed, as we all know, is one of the seven deadly sins.  So, we have redefined something with enormous positive effects as something that is sinful.  

Capitalism and the profit motive have driven innovation from the 1690s, when the invention of the steam engine and steel plows made farms more productive, to the1870s, when the invention of both the automobile engine and distribution of electricity began an era of rapidly improving lifestyles, to the 1990s when the Internet boom created an interconnected world.

The result of all this innovation…

Poverty has been reduced to one fifth of what it was in 1900.  Child labor has been reduced by half since 2000.  Number of hours worked per worker has been reduced by one third since the 19th Century.  Infant mortality is half of what it was in 1990. The store of nuclear weapons has been reduced fivefold since the end of the Cold War. Carbon emissions have been flat for the last four years. (Yes, government regulation played an important role in these improvements.)

All this is the result of innovation driven by free-market capitalism. It would not have happened if we lived in a socialist system.

As for those who contend that capitalism exploits workers, I offer this:  Other things being equal – culture, geography, education, etc. – workers always thrive in a capitalist system where socialism fails to deliver.  Think of North and South Korea, Taiwan and Mainland China, or East and West Germany.

To be clear, it is the free enterprise, capitalist system that has led to a better life for Americans.  In its absence, you wouldn't have time to play with your kids or enjoy a glass of wine with your friends on Saturday night; you wouldn't be able to access the Internet from an electronic device in your pocket; and, you wouldn't be living in a climate controlled home.  You would be working hard and not reaping the benefits.  The benefit of your labor would go to the government.

Free-market capitalism is the surest path to prosperity. To describe it as corporate greed is doing all of us a disservice.  To consider voting for a socialist is the height of folly.

WHO WILL LEAD?