Business

The Tragedy of the Common Need

You’ve probably heard of the tragedy of the commons — first discussed as early as 1883, but more recently popularized during the ecology craze of the late 60s by Garrett Hardin. A shared resource like community grazing land, fish in the sea, or unpolluted air tends to be overused and destroyed by individuals who can gain from using it because it is not in any one user’s interest to limit their use to avoid damaging the resource. Common grazing areas would be trampled and muddy, fish schools would disappear from the sea, and air would grow more and more polluted when no one paid or accounted for use of the resource. Now in real situations like common grazing areas, it was often the case that formal or informal rules were established and enforced by the community to limit overuse; this sometimes works well and sometimes fails completely when there are no realistic means of enforcement.

One solution is property rights — if the common is turned over to an owner or owners, they have an incentive and are permitted to charge for use and exclude those who will not pay. In the case of grazing rights, the shepherd might be asked to pay a few coins to let his or her sheep forage on the land for a few hours. By taking note of the state of the land and refusing to allow grazing or increasing the charges when the land is threatened by heavy use, the owner can establish a sustainable usage pattern and maximize revenue from the property to be used for maintenance (and to pay the toll collector.)

This is one kind of externality — any one person’s use of the limited resource impinges on others, so allowing free use damages the total output of the system and hurts others who might have benefitted from using them. Absent such externalities, free-market voluntary exchange as thus simplified tends toward generation of Pareto-optimal solutions — everyone’s utility is maximized and any divergence from the solution makes at least one person worse off without making anyone else as much better off. Of course such perfect markets and conditions of knowledge don’t occur in real life, but many simple markets come close.

The tragedy of the commons is what happens when there is a non-excludable but exhaustable good: one can’t exclude some users (or charge them, since exclusion is the enforcement condition for charging for use or consumption.) There are other kinds of externality, though: public goods, which are not only non-excludable but aren’t depleted by overuse. Examples would include most goods which can be duplicated at no cost, like news or (today) free Internet writings. All benefit from their production, but since once created these goods are shared easily and can’t be charged for, economists would argue less of such goods are created than would be optimal. This is one argument for public education: though every person benefits directly when they pay for their own education, society as a whole benefits if education is widespread and available also to those who can’t afford to pay for it themselves. This is the argument of communitarians — they believe it is in everyone’s best interest to tax some to fund goods for all, to be shared with everyone. There are other methods for paying for public goods, like advertising sales and charity, but these alternate funding mechanisms may distort the quality of the good (as advertising has tended to create a lowest-common-denominator level of quality in those goods like network TV and clickbait sites that rely on ads.)

Now what about “common bads” — products or actions that harm individuals, like violence or theft. No one wants to be a victim and sensible people will avoid the bads, but community bads like street crime can’t be completely avoided by one person’s payments or actions. A police force addresses this common bad by suppressing crime at common expense, and so that too is another proper function of an efficient government.

So economists argue endlessly about aspects of these “corner cases” where complete information and free markets can’t create optimal exchange networks because of externalities. The argument for a government, or “public sector,” is that only a common authority can create conditions where these problems are addressed, enforcing contracts, law, and property rights to correct “market failures” and allow everyone to go about their business unharmed by the depradations of others that would infringe on their rights.

But of course there is no perfect government. The individuals who manage and staff public agencies are motivated by their own self-interest as well as any idealism about the General Good they may have, and over time the rationale for their actions may be enlarged beyond simply mediating necessary conflicts between individuals and their rights to free action and property. Once these areas are dominated by a “free” government service, the private competition shrinks or dies completely, and can never return to compete. This is the ratchet effect, where movement goes only one way — toward larger state control — making reform difficult.

This tendency to expand government into what would otherwise be private and mostly efficient decisions is most easily combatted by supporting a constitution that specifically states what areas government should act in, and has a mechanism to prevent encroachments outside those areas. Our judicial branch has failed to strike down overreach, especially after the New Deal quashing of the Supreme Court’s pushback against the administrative state. So Step 1 is to appoint new justices who are more skeptical of well-intended but improper laws and regulations.

There is a more general agency problem– those elected or hired to decide for the people have interests which do not entirely reflect the people’s, and will tend to act to benefit themselves first. This is the primary reason why government-provided services can’t compete with private services in efficiency — in private services we fire the unsatisfactory providers and hire new ones with every purchasing decision, whereas government services are usually monopolies and the connection between customer satisfaction and revenue is broken. Ask veterans how happy they are with VA provision of healthcare and you’ll get some unprintable answers because of the thoughtless bureaucracy they have to deal with to get care.

Over time public provision of shared goods creates a class of substandard, even dangerous corrupt goods that crowds out private and better equivalents. In a laissez-faire world, mass public education and healthcare seem like improvements, but they crowded out the private systems which had grown up before the time they were introduced, and few now remember the thriving voluntary welfare organizations and schools. Lacking much private competition, these public monopolies are now mediocre and doing great harm to, for example, inner city school children who never learn to read, write, and compute, but are graduated anyway. All forms of public news, education, and healthcare are used to mold the views of future voters toward an even larger state, and narrow interests like teacher’s unions capture their institutions and prevent improvements or competition. This is ultimately damaging to democratic decisionmaking, as voters learn so little about their government in public schools that they are easily demagogued into supporting a larger state. The usual argument for public schools was that they provided a common education required for high-quality citizen involvement–but as we have seen, they have been turned into indoctrination centers, with neutral history, civics, and science education squeezed out for political programming.

The public support for government emergency assistance, medical care, old age support, and security led to divorcing of the provision of these from the family or clan networks that once provided them, as police and a justice system took over from blood feuds and vendetta in keeping order between families. But the consequences are a change in incentives: instead of loyalty to family, loyalty to state and party came to be as or more important. And now we contend over politics because so much of life is now determined by government. If you ignore politics, your life, your property, and your children will come under control of others who don’t know you or yours at all.

More reading on other topics:

Jane Jacobs’ Monstrous Hybrids: Guardians vs Commerce
The Great Progressive Stagnation vs. Dynamism
Death by HR: How Affirmative Action is Crippling America
Death by HR: The End of Merit in Civil Service
Corrupt Feedback Loops: Public Employee Unions
Death by HR: History and Practice of Affirmative Action and the EEOC
Civil Service: Woodrow Wilson’s Progressive Dream
Bootleggers and Baptists
Corrupt Feedback Loops: Justice Dept. Extortion
Corrupt Feedback Loops, Goldman Sachs: More Justice Dept. Extortion
Death by HR: The Birth and Evolution of the HR Department
Death by HR: The Simple Model of Project Labor
Levellers and Redistributionists: The Feudal Underpinnings of Socialism
Sons of Liberty vs. National Front
Trump World: Looking Backward
Minimum Wage: The Parable of the Ladder
Selective Outrage
Culture Wars: Co-Existence Through Limited Government
Social Justice Warriors, Jihadists, and Neo-Nazis: Constructed Identities
Tuitions Inflated, Product Degraded, Student Debts Unsustainable
The Morality of Glamour

On Affirmative Action and Social Policy:

Affirmative Action: Chinese, Indian-Origin Citizens in Malaysia Oppressed
Affirmative Action: Caste Reservation in India
Diversity Hires: Pressure on High Tech<a
Title IX Totalitarianism is Gender-Neutral
Public Schools in Poor Districts: For Control Not Education
Real-Life “Hunger Games”: Soft Oppression Destroys the Poor
The Social Decay of Black Neighborhoods (And Yours!)
Child Welfare Ideas: Every Child Gets a Government Guardian!
“Income Inequality” Propaganda is Just Disguised Materialism

The greatest hits from SubstrateWars.com (Science Fiction topics):

Fear is the Mindkiller
Mirror Neurons and Irene Gallo
YA Dystopias vs Heinlein et al: Social Justice Warriors Strike Again
Selective Outrage
Sons of Liberty vs. National Front
“Tomorrowland”: Tragic Misfire
The Death of “Wired”: Hugo Awards Edition
Hugos, Sad Puppies 3, and Direct Knowledge
Selective Outrage and Angry Tribes
Men of Honor vs Victim Culture
SFF, Hugos, Curating the Best
“Why Aren’t There More Women Futurists?”
Science Fiction Fandom and SJW warfare

More reading on the military:

US Military: From No Standing Armies to Permanent Global Power
US Military: The Desegration Experience
The VA Scandals: Death by Bureaucracy

Harvey Weinstein: Abusive Attachment?

I’ve had a few questions about Harvey Weinstein — like, what is his attachment type? Are abusive Lotharios dismissive-avoidant, or what?

If you haven’t read them, here are a few background stories:

“From Aggressive Overtures to Sexual Assault: Harvey Weinstein’s Accusers Tell Their Stories” – The New Yorker, Ronan Farrow

“The Human Stain: Why the Harvey Weinstein Story Is Worse Than You Think” – The Weekly Standard, Lee Smith

Because of his loss of power recently, he is no longer able to shield himself or punish accusers as he did when he was at the center of motion pictures and casting decisions. From Virginia Postrel’s Bloomberg story “Why Weinstein Held On For So Long and Fell So Fast”:

Communism was considered invincible. Then the fall of the Berlin Wall started a domino effect that brought down six Soviet satellites in quick succession, and soon after the Soviet Union itself. Though communism’s failures were widely understood, no one thought it vulnerable to street demonstrations. In East Berlin in 1953, Hungary in 1956, and Czechoslovakia in 1968, it had demonstrated a willingness to crush dissent brutally. Moreover, for decades on end, the members of communist-ruled societies had displayed a remarkable tolerance for tyranny and inefficiency. They remained docile and even outwardly supportive of the status quo.

For all this submissiveness, it turned out that millions had been willing to revolt all along — if enough others would also revolt and they felt sufficiently sure of escaping punishment. But no one knew exactly what needed to happen to set off a successful uprising. In retrospect, all it took was a few thousand demonstrators calling for more freedom and a regime that signaled that it was afraid of overreacting. People standing on the sidelines suddenly found the courage to join in, and the East German revolt started feeding on itself.

Before long, fear changed sides. People who had never criticized communism publicly were now afraid to be caught defending it. Genuine supporters of communism (they, too, numbered in the millions) joined the opposition. They took to pretending to have been falsifying their political preferences out of fear, like their compatriots who had genuinely felt oppressed.

Harvey Weinstein’s fall from grace fits the same pattern. Few Hollywood executives have been as powerful as he. His movies have earned hundreds of Oscar nominations. He was both admired and feared as someone who could make or break a career. As a major fundraiser for Democratic Party candidates, he had national political clout. Though he was rumored to be predator of young women, Hollywood insiders and many observers knew that he dealt ruthlessly with anyone who crossed him. Reporters who investigated his behavior found almost no one willing to speak honestly or on the record. Many people who were hurt by Weinstein suffered, we now know, for their own silence. They wanted to go public with their stories all along.

For his behavior to draw public criticism, it was not enough for Weinstein’s behavior to be widely known. Potential complainers needed to know that other victims and witnesses would back them up. They also needed to believe that Weinstein’s supporters or the press would not smear their reputations. It needed to be sufficiently likely that the early movers would be greeted with sympathy rather than condemnation.

A number of accusers are probably exaggerating or confabulating to pile on since a story of your encounter with him is now a net positive for your notice and career. But as with Bill Cosby, the numbers suggest many of the reports are true.

His “production line” for having starlets delivered into private situations so he could pressure them into sex had to have been enabled by helpful staff, agents, and others who could have blown the whistle, including a complicit media who were easily stopped from reporting stories as they came up. Weinstein controlled ad revenues, contacts both professional and political, and knowledge of others useful for blackmail. His participation in the corrupt Clinton-Democratic machine shielded him, as it did Bill Clinton, from the worst attacks by feminists and reporters. It has come out now because their power has waned, and the Clinton Foundation influence-peddling machine is dying.

This kind of methodical abuse is outside the usual attachment type considerations. Weinstein was closer to a psychopath-narcissist, with a special extra dash of sadism — he got off on the power to force beautiful young women to submit to his will, to degrade them with his sperm and get away with shaming them without consequence to himself. His insecurity was expressed differently than on the usual anxious-to-dismissive axis.

But this story shouldn’t produce a witch hunt to criminalize or punish anyone who commits an error in judgment.

If rude and clumsy approaches were crimes, we’d all be in jail (well, almost all.) When I was young and reasonably good-looking, I got hit on a lot in venues that invited that (bars, parties, etc.) It wouldn’t occur to me to think of myself as grievously wronged with the first grope — the offender gets rebuked and avoided, with a wagging finger and “tsk!”

One good example of a misdemeanor offense: one of the incidents being talked about has Philip K Dick’s daughter in a cab with the Amazon Films producer after a party going to another party. He’s aggressive and pushy and profane. So what? She knew there was no danger to her participation, he had clearly overdone the drinking, she immediately reported it, it didn’t happen again. That’s a common event for anyone who goes to mixed drinking/business/social events. Guy was presumably warned.

The workplaces where pressure is constant and one rebuke doesn’t stop the approaches are where the legally actionable stuff happens. Weinstein had a whole system and cooperative employees/agents/staff, quite a different thing from an occasional drunken mistake.

Which is where the neo-Puritan, fragile flowers of femininity problem shows up. You can‘t claim equality and go out in the world and then turn around and claim privilege to never be offended or crudely approached. Men tend to excuse one or even several offenses from their fellow employees before going on the warpath. Woman are being trained to claim a right to success and a right to special treatment beyond what others enjoy. “I am good and strong on a team” does not quite jibe with “Every offense to my dignity should be punished by expulsion of the offender.”

More reading:

A Clinton Christmas Carol
“High Tech Under Diversity Pressure
Ban the Box, Credit Scores, Current Salaries: The Road to Hiring Blind
HireVue, Video Interviews, and AI Job Searches
“Death by HR” – Diversity Programs Don’t Work

“Death by HR” – “a valuable, and fun, read.”
Death by HR: How Affirmative Action Cripples Organizations

Death by HR

[Death by HR: How Affirmative Action Cripples Organizations, available now for Kindle and trade paperback.]

I missed a new review of Death by HR at Amazon a few months back. It blends some quotes from the book with the reviewer’s comments to make some additional points:

5.0 out of 5 stars
HR: Symptom or Disease?
By Alan F. Sewell on February 17, 2017
Format: Kindle Edition|Verified Purchase

This book seeks to answer a question posed by job seekers in their 40’s and 50’s: “Why is it impossible for experienced people our age, whose jobs were eliminated by {downsizing, rightsizing, outsourcing, offshoring, re-engineering, work force reductions, involuntary early retirements} to get back to work?”

Companies keep saying that they can’t find candidates qualified with the skills they need, yet tens of millions of highly educated people with years of success under their belts — engineers, business managers, and computer science Ph.D’s — are sitting home twiddling their thumbs because HR Departments will not consider them for open positions that match their skills and experience.

Corporations are very complex organizations. It’s easy to pick out one cog in their wheels — such as “overpaid CEO’s with short attention spans” or “boneheaded bean counters” or “HR drones” to pin all the blame for our poor economy and diminishing job opportunities on. Like every other department, HR is bound to garner a fair share of criticism. How much of it is justified?

HR departments exist because they fulfill a necessary function. HR does after all serve the essential purpose of improving the likelihood that corporations will treat their employees ethically. These days that includes affirmative action diversity goals, conflict resolution, compliance with employment law, and other aspects of personnel management that must be addressed.

On the other hand, every corporate department must constantly strive for improvement that corrects justified complaints.

The biggest beef with HR Departments is that instead of lubricating the gears of employment by matching the most promising job candidates to job openings, HR people throw sand in the gears and block corporations from hiring the very people a corporation needs to inject new blood and vigor into its ossified bureaucracy. HR people are often seen as narrow-minded, ignorant of their companies’ businesses, biased (against “normal” people) in their hiring preferences, well-deserving their low pay and low status, and frankly stupid.

This book certainly aligns with the negative view of HR:
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HR functionaries are roughly analogous to the commissars or political officers of Communist regimes, a separate hierarchy of spies to report on and control internal units. The interests of managers and HR can diverge drastically, with HR coming to be viewed as the enemy within, to be avoided and routed around. One high-tech team manager wrote, “How can you tell HR is lying? Their lips are moving.”

HR has come to be viewed as a pink-collar ghetto, a feminized and lower-status department from which few would graduate into the highest levels of management.

This new wrinkle in HR practices seems like the most unsettling and counterproductive yet. It not only removes access to the hiring manager, but also live, human interaction. It sounds like “HR pornography,” where perverted personnel jockeys huddle around a monitor to gawk at videos of “virtual job candidates,” picking apart perceived blunders while they screen you out.

What I learned in my experience with these [soul-crushing people of low intelligence] is that passive-aggressive noncompliance thwarts them…

HR departments may be worse than useless as recruiters— they sometimes actively repel the best applicants.
======

No kudos for HR people here! HR is portrayed as a disease imposed on companies by the necessity to comply with government mandates for equal opportunity and diversity. However, HR is also portrayed as a symptom of a larger disease of corporate mismanagement:

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Mediocre managements take current rewards for themselves but ignore the future, eventually failing. Foreign companies take over markets, one by one, as US companies dragged down by unions and mediocre key employees lose revenues and eventually abandon markets.

HR often reports to the CFO, and thereby becomes a cost-saving arm. Public companies can fall into the managed-earnings trap, where every hiccup in revenues and earnings is smoothed by carefully-timed layoffs. Many mature Silicon Valley companies now go through layoffs every few quarters, usually justified as responding to poor prospects in one business line or other, but really aimed at keeping investors soothed and the stock price up. Upper-level management bonuses and stock options depend on a high and stable stock price; HR becomes the earnings-management handmaiden of the CFO, allowing short-term gains for top employees and investors at the expense of long-term development of a productive, stable workforce.
======

[Ed. note: the above were quotes from the book, below is apparently the reviewer’s views]

So, what really is the story on HR? I know an HR person in our family. She fits the “HR profile” of being a young female minority. She’s nice, well-mannered, and well-spoken. She does fit this book’s stereotype of HR people who are salespersons for trafficking in job applicants as commodities. They will only consider other “salesy” people like themselves who smile, are witty conversationalists, sharp dressers, young, and speak in fashionable buzzwords.

When HR people like her control the hiring, the “preening empty suit” candidates are at a premium, while the other 90% of candidates who are older, average in appearance and dress, and analytical instead of salesy have zero chance of being hired. Since we’re in a “musical chairs” economy that produces more layoffs than hirings in most years, the people who lose their jobs in late career are the ones who have the chairs jerked out from under them and can’t get back in the work force. Of course these people voted massively for Trump in 2016.

Author Jeb Kinnison also explains, from first hand experience, these shortcomings of HR departments, and also of upper corporation management and the government’s over-bearing regulations and quota-mongering. These are all employment-killers for people with skills in demand and records of proven accomplishments who were laid off in late career.

Kinnison also mentions another factor, which is that the economy has been so bad since the late 1990s that companies don’t expect to grow, so they put off hiring as long as possible. This explains the crazy situations whereby people who are perfectly qualified for a job opening are rejected, while the job opening remains unfilled for years. Then corporation management tells the government, “We can’t find Americans who are qualified to work for us, so give us more (low paid) Indians on H1-B visa’s.”

My take away is that HR Departments are beneficial in many aspects, such as conflict resolution and adherence to legal requirements for avoiding discrimination suits in hiring, firing, and promotion. But HR is not the best department for making hiring decisions. The hiring managers should do the hiring directly as they used to. They are the ones who are experienced in the business and know better than HR how to evaluate new hires. Once people are hired in, then HR becomes useful when problems of personnel conflict or potential discrimination or sexual harassment occur.

I can relate from personal experience what Mr. Kinnison is talking about. I enjoyed his observations and anecdotal story-telling. I also enjoyed his bringing many other factors that have negative impacts on HR, such as short-sighted corporate management and excessive government demands for diversity quotas. These external factors make HR much more annoying and detrimental than it probably would be without them.

So, HR is not just a disease, but also a symptom of other corporation and government diseases.

This book puts all of that into perspective and is a valuable, and fun, read.

Death by HR: How Affirmative Action Cripples Organizations

[Death by HR: How Affirmative Action Cripples Organizations,  available now in Kindle and trade paperback.]

The first review is in: by Elmer T. Jones, author of The Employment Game. 

Corporate HR Scrambles to Halt Publication of “Death by HR”

Nobody gets a job through HR. The purpose of HR is to protect their parent organization against lawsuits for running afoul of the government’s diversity extortion bureaus. HR kills companies by blanketing industry with onerous gender and race labor compliance rules and forcing companies to hire useless HR staff to process the associated paperwork… a tour de force… carefully explains to CEOs how HR poisons their companies and what steps they may take to marginalize this threat… It is time to turn the tide against this madness, and Death by HR is an important research tool… All CEOs should read this book. If you are a mere worker drone but care about your company, you should forward an anonymous copy to him.

Ban the Box, Credit Scores, Current Salaries: The Road to Hiring Blind
High Tech Under Diversity Pressure
HireVue, Video Interviews, and AI Job Searches
Diversity Programs Don’t Work

The Monopoly Curse: Bad Management at Google
Dissident artist Sabo's work

Dissident artist Sabo’s work

The recent Google news will be reviewed in another post soon. The Damore Google Memo affair, in which management threw a high-level employee under the bus for wrongthink and thereby assisted in damaging Google’s image of political neutrality among a large share of the population, is another sign that their management has been made stupid by the easy profits of its monopoly on search and near-monopoly on advertising. With the initial corporate motto of “Don’t Be Evil,” the company had built its business on the trust of its billions of users, who had came to believe the company would not abuse its power by manipulating its search results or targeting advertising by scanning private email and search terms. That trust is being rapidly eroded by an increasingly careless management.

The story presented in most media:

White male engineer James Damore blasts fellow employees with email alleging females can’t be good software engineers. This makes women and minorities at Google feel unsafe, so in order to support a diverse work environment, management wisely fired him. They should have done it sooner, and should also fire every employee who didn’t condemn him.

The more complicated, true story:

Geeky science guy James Damore, who left a PhD program in evolutionary biology to join Google, wrote a memo circulated internally in a group set up by Google for diversity discussion. He used stats and studies to argue for changes to diversity programs to more effectively recruit women, who he argued were not choosing to be software engineers in large enough numbers to increase their representation at Google. Much internal discussion, then a group of offended — who turned his words into “women are unfit to program at Google” — started emailing management asking that he be fired. When that didn’t work, they leaked his memo to Gizmodo, which ran it without cites and labeled it an “anti-diversity screed” (pre-slandering him because it really wasn’t, it was more tactless but well-meaning.) Outrage and Twitter mobs descended, more leaks revealed managers keeping internal blacklists and employees threatening to leave unless he was fired, employees asking for everyone who supported his memo to be fired as well. Threats and doxxing all around, employees not getting work done while they had emotional breakdowns or spent all day engaged online.

In other words, a really bad week for Google. Meanwhile at Apple, everyone knows taking internal business outside via leaks is a firing offense. This kind of emo firestorm is much less likely where employees haven’t been told over and over again they’re the most perfect snowflakes on the planet and they can do as much online activism as they want since they have no lives outside Google, the free food, the 60-hour weeks, the relentless pressure to conform that comes from having only below-30s on a campus without deeper knowledge.

Why did management abandon their commitment (even restated in the announcement of Damore’s firing) to free expression? Because the company was already under attack by activists for supposed equal pay violations, with the EEOC asking for an unprecedented level of disclosure of employee salary information and data. Stepped-up efforts to increase the ratio of women and minorities had already failed to do much (other than filling the ranks with progressive activists from academia), while straying across the line of illegal discrimination against others, as alleged by Damore’s memo. And meanwhile, a class-action lawsuit seeking damages for Google’s long and well-documented history of discrimination against older applicants continues to make its way through the courts.

Having employees leak internal emails to outside journalists to gain external allies in their disputes had already damaged the company’s image, and the firing doubled down on that by illustrating just how easily management would bow to activists. If they cave so easily, how long before they allow private customer data to be used against their own customers to satisfy governments and intelligence agencies? Many suspect they already have.

The resource curse is the observation that countries blessed with lots of natural resources like oil or minerals have a tendency to waste that endowment, through mediocre and corrupt administration. The politicians of such countries tend to use the easy revenues to maintain repressive regimes while making family and friends incredibly wealthy. The payoffs to residents raise incomes, prices, and currency exchange rates, making it hard for other kinds of economic activity to survive in the territory of the regime. This becomes most noticeable when the resource revenues begin to decrease and the hollowed-out local economy collapses, as in Venezuela or for a less extreme example, Saudi Arabia.

But companies can have the analogous problem. Blessed by a near-monopoly in some market because of network effects or patent protections, the company can lose its competitiveness. Its management can’t easily help or harm the monopoly revenue stream, but can easily create the appearance of activity by investing in many other areas and buying back its own stock, which keeps its value high and avoids stockholder complaints and attacks by dissident investors. When the fountain of monopoly revenues is suddenly reduced by new technology or the appearance of a disruptive competitor, what appeared to be an unassailable position can start to crumble, laying bare the malinvestment of decades of revenues.

The article “Microsoft, Amazon and the ‘Resource Curse'” at Crash/Dev of April 4, 2013, describes the “resource curse” at Microsoft and calls out Google as a likely future sufferer:

Microsoft could be the tech industry poster child for the resource curse — a company seemingly blessed with a massively profitable and “sticky” core franchise (Windows + Office), but that has failed for over a decade to deploy that wealth productively in support of new initiatives.

Even the way the company prosecutes innovation — dumping billions into late-mover attempts to imitate industry leaders (Apple and Google most notably), or grossly overpaying for “strategic” acquisitions that somehow fail to thrive post-deal (e.g., Avenue A / Aquantive, Skype, Yammer) — seems to reflect a misplaced faith in overwhelming force over persistent excellence as the decisive factor in any given strategic battle….

P.S. — Google is the next in line to suffer from the resource curse — their core search advertising franchise is the magic cash machine that feeds their culture of abundance — but so far they’ve done a better job of deploying that cash against genuine innovation that matters (Gmail, Google Maps, Android, Google Docs) than Microsoft. Only time will tell, but the realist in me thinks that the resource curse will eventually erode that culture’s competence from the inside out no matter how well the leaders play their cards.

Steve Jobs was right when he said “stay hungry, stay foolish” — too much of a good thing never turns out well.

Recently this problem has been made worse by what had previously been seen as a European-style abuse, the use of nonvoting stock classes to allow small groups or families to control big companies without holding the majority of equity. This kind of structure concentrates control with insiders, which works well enough and has some advantages when the insiders are especially good managers. The downside, of course, is that insiders rarely stay good for the life of a firm. There’s a reason most growth companies eventually put their founders aside, as long-term, mature businesses need a different set of skills than startups and young growth companies, and the two are rarely combined in the same people. Studies show companies with dual-class shares tend to perform poorly, with many looted by insiders, and that a better arrangement would give insiders nonvoting shares to reduce the corrupt feedback loop of insider control of the board that results when voting shares are mostly held by insiders.

Google’s ownership structure is especially problematic:

The new Class C shares have no voting rights. The Class A shares have one vote each, but collectively those votes are dwarfed by the 10-votes-per-share Class B shares. Those shares, which do not trade in the public market, are owned by Google insiders, who will also get Class C shares in the distribution.

As originally proposed by the company, the move would have made it easy for Google’s founders, Larry Page and Sergey Brin, and the chairman, Eric E. Schmidt, to cash in a large part of their holdings without giving up their voting control. But that ability has been limited after the company settled a class action suit filed by angry (Class A) shareholders, and reached agreements with the three top officials to limit their sales.

In essence, for every share of Class C they sell, they must also convert one Class B share into Class A. Presumably they will sell that share as well. So their voting rights will fall as they would have under the old structure, when they would have converted Class B shares into Class A shares before selling them.

But Google is expected to issue primarily Class C shares in the future, for acquisitions and in grants of share options. So the total number of votes will not be rising, and that will delay the day when the company’s leaders lose voting control of the company. Currently they own less than 16 percent of the company’s shares, and have 61 percent of the votes.

This structure has left Sergey Brin and Larry Page as founders, along with Eric Schmidt the politically-minded CEO, in control of Alphabet, parent of Google and Youtube. It appears from a Recode report on the internal meeting where management decided to fire Damore that Youtube CEO Susan Wojcicki, former sister-in-law of Sergey Brin, was instrumental in arguing for his termination against free speech advocates in management:

It’s a split reflected at the very top of Google’s owner, Alphabet, where its top lawyer, David Drummond, has been one of the most vocal advocates of free speech over the years. As an Alphabet exec, he was not part of Monday’s decision-making meeting.

Meanwhile, another longtime Google leader, YouTube CEO Susan Wojcicki, who was at the meeting, penned her own essay that appeared in Fortune this week, with an opposite take.

“While people may have a right to express their beliefs in public, that does not mean companies cannot take action when women are subjected to comments that perpetuate negative stereotypes about them based on their gender,” she wrote. “Every day, companies take action against employees who make unlawful statements about co-workers, or create hostile work environments.” …

Family and friends of the founders, it appears, bring their personal hobbyhorses to work at Google. The investors who have disfavored classes of shares are left holding the bag.

But there’s more evidence of management inattention to business. The same issues were seen at Microsoft, which blew near-monopoly profits in Windows and Office on a series of failures and spent a decade investing unwisely in other areas. Google appears to be similarly failing to invest wisely, and inattention to costs and employee productivity is apparent in the phenomenon of “rest and vest” — engineers given little oversight and delivering little work product when the company fails to manage them effectively or has bureaucratic reasons to keep them idle. In the article “Tech workers are sending this ‘Silicon Valley’ star some surprising pictures from their offices,” by Melia Robinson, Business Insider, Aug. 24, 2016:

Actor Josh Brener, who plays Big Head on “Silicon Valley,” has no doubt there are tech workers living out his character’s storyline. The proof is on his phone.

“Since the show has been on, I’ve actually had a number of people — including today at Google X — I’ve had people send me pictures of themselves on a roof, kicking back doing nothing, with the hashtag ‘unassigned’ or ‘rest and vest,'” Brener told Business Insider. “It’s something that really happens, and apparently, somewhat often.”

Management also seems to not only tolerate but encourage employee political activity and activism during work hours — and since Google intentionally erases the line between work and nonwork hours to as much as possible keep its young employees on campus or doing work remotely, many young employees don’t see any distinction between the professional and personal. Use of hours and company resources in approved political causes is common, and the young activists can be forgiven if they believed their work for social justice allowed them to leak inside communications to recruit outside allies to force the company to fire Damore — how would they know otherwise, since all their internal and external campaigning on behalf of Black Lives Matter, LGBTQ causes, and progressive politicians was accepted without rebuke? The problem is that only some points of view were so tolerated, while others, as pointed out by Damore, were stifled and punished.

And the results of Google’s investment of near-monopoly profits in new business segments aren’t especially promising despite the excellent PR they’ve had. Ventures in phone software (Android) and media sales (Google Play) are inferior and despite great market impact, generate little revenue. Self-driving cars are the wave of the future, but there’s no sign Google will ever make much money from its pioneering investments. The first quarterly income report breaking out business by segments shows the problem:

For the first time in Google’s history, we finally have an idea of how those side projects—self-driving cars, Nest thermostats, attempts at defeating death, etc.—actually perform. And unsurprisingly, they’re bleeding a lot of money.

Alphabet, Google’s new parent company, reported its earnings today (Feb. 1) and revealed that its “Other Bets“—a bucket that includes Google Fiber, Calico, Nest, Verily (formerly Google Life Sciences), Google Ventures, Google Capital, and Google X—had an operating loss of $3.57 billion in 2015. These speculative, “moonshot”-type businesses generated $448 million in annual revenue, up 37% from the previous year, but the reported loss was 83% wider.

https://www.theatlas.com/javascripts/atlas.js

Google’s dominance in search and advertising will most likely continue, but the number of people who question whether that is dangerous to freedom of expression and privacy leaped enormously because of this episode — I was personally happy to trust them with my email and docs until now but will find alternatives where practical.

Death by HR: How Affirmative Action Cripples Organizations

Death by HR: How Affirmative Action Cripples Organizations

[Death by HR: How Affirmative Action Cripples Organizations, in Kindle and trade paperback.]

The first review is in: by Elmer T. Jones, author of The Employment Game. 

Corporate HR Scrambles to Halt Publication of “Death by HR”

Nobody gets a job through HR. The purpose of HR is to protect their parent organization against lawsuits for running afoul of the government’s diversity extortion bureaus. HR kills companies by blanketing industry with onerous gender and race labor compliance rules and forcing companies to hire useless HR staff to process the associated paperwork… a tour de force… carefully explains to CEOs how HR poisons their companies and what steps they may take to marginalize this threat…. It is time to turn the tide against this madness and Death by HR is an important research tool…  All CEOs should read this book. If you are a mere worker drone but care about your company, you should forward an anonymous copy to him.

More reading:

“High Tech Under Diversity Pressure
Ban the Box, Credit Scores, Current Salaries: The Road to Hiring Blind
HireVue, Video Interviews, and AI Job Searches
“Death by HR” – Diversity Programs Don’t Work