July 30, 2003

Short-term thinking

Kayne McGladrey over on Pleasing to Remember has some comments on a recent prediction that ten percent of tech jobs will go offshore in 2004.

I work for a company that's in the process of making that prediction a reality. (And in my position, I get to build the infrastructure so that the work my friends were doing before they were laid off can be done by less expensive engineers in India. This state of affairs is hard on my conscience, but that's another post for another time.)

I don't understand this selfish approach to business.

Companies pay people to make products which they then sell to other people. They make money by selling the products for more money than the sum of the material cost and the creation cost (labor, overhead, r&d). So to increase profits a company must lower their costs, increase their volume, or raise their prices. I get all that. (There's also all the illegal tactics, but again, that's another rant for another time)

So we see all the stuff that makes it so fun to live in these times. Incessant corporate cost-cutting which makes the news mostly in the form of reductions in force. Ubiquitous advertising seeking to woo consumers to purchase specific products. Increasing prices on products that shouldn't cost any more to produce.

Mr. McGladrey points out just the problem with this complex of tactics:

Moving US jobs overseas is not a way to encourage long-term financial stability in the global economy. Every job lost represents another family that has reduced purchasing power. Reducing Americans' purchasing power removes their ability to buy goods or services sold by American businesses. Prices are not going to fall, even if those businesses are predominantly staffed by overseas employees. Therefore, moving one in ten IT jobs offshore may create a short-term cost savings but a long-term crisis for American technology businesses. Once those jobs are gone, it's unlikely that they will return.

Constant grubbing after ever greater profit for shareholders who do no one any good except by loaning out their money at cutthroat rates is the root of all these evils.

In my utopian naivete, I picture corporations as mechanisms for providing two services to society: useful products to the general public and gainful, satisfying employment to their workers. A small profit for investors could be a reasonable part of this picture, but no one seems to be satisfied with a small profit. Or even a sustainable profit.

I haven't taken the time to work out at what point my utopian fantasy becomes the dystopia that all utopian visions seem to mask. Intuitively, I suspect that its fatal flaw is two-pronged. There are too many humans in the world and all our requirements for truly useful products are too limited to keep us all busy without an artificial inflation of desires and production.

Hidden inside this conflict is another utopian idea: if we collectively limited our labors to just those required to provide for the reasonable needs of all people, what could we do with the vast surplus of human time and energy that would result?

I'm afraid human nature would quickly provide my answer, but it's nice to dream about.

Posted by jeffy at July 30, 2003 05:17 PM

One of the things to bear in mind is that companies are not morally obligated to employ local workers. Without moral obligations and increasingly less bound by their own conscience, executives are racing their companies to the bottom. Companies are not social institutions, and they predominantly operate for the short-term benefits of their shareholders. The good of the "common man" does not fit into this model.

Posted by: Kayne at August 1, 2003 12:27 AM


What I wonder about is whether a structure with a social conscience could be devised which could compete successfully in an evolutionary sense with the predatory corporate model we have.

There are things we need to do which require the organization of more effort and capital than can be summoned by individuals. Corporations seem to be the only structure that's viably fulfilling this function.

My intuitive/analytic side has been struggling to identify what environmental factors make amoral corporate behavior a viable success strategy. Then the question becomes can we consciously change those factors such that some other more preferable structure will arise.

Posted by: Jeff Youngstrom at August 1, 2003 03:26 PM