Sunday, March 18, 2012

Regulatory Strangulation, Perhaps Also Puritanism

So it turns out that when you feel exhausted, it's because you are exhausted. (Via.) Outrageous, I know. Even more outrageous, it means you should stop working.

Apparently this is some great insight. I must be a genius for thinking of it myself, without any science to back me up. Are you a genius too? If you haven't read the article, here's a test: deathmarches are useful under what circumstances, and if any, what are the costs? Ctrl-f 'exception' to find out if you win!

Rants aside,
"We will not turn this situation around until we do what our 19th-century ancestors did: confront our bosses, present them with the data, and make them understand that what they are doing amounts to employee abuse — and that abuse is based on assumptions that are directly costing them untold potential profits."
Haha. No? Way to miss the elephant in the room. Let me cite this exact article...
"The rapacious new corporate ethic was summarized by two phrases: "churn ‘em and burn ‘em" (a term that described Microsoft’s habit of hiring young programmers fresh out of school and working them 70 hours a week until they dropped, and then firing them and hiring more)"
"The most essential thing to know about the 40-hour work-week is that, while it was the unions that pushed it, business leaders ultimately went along with it because their own data convinced them this was a solid, hard-nosed business decision. [...] By 1914, emboldened by a dozen years of in-house research, Henry Ford famously took the radical step of doubling his workers’ pay, and cut shifts in Ford plants from nine hours to eight."
For every social problem, I must first rule out government intervention as the cause. Mainly because I almost never can.

The workforce can only withstand so much turnover before partly-burned-out becomes normal, degrading the entire thing. Similarly, the economy can only withstand so many wealth-destroying death marches before capital investment erodes noticeably, taking optimal productivity with it. Both effects amplify the number of jobs taken out of the money.
At the same time, new job creation - almost entirely due to innovation - has to compete with old innovations going artificially obsolete.

Confront the bosses? Robinson already admitted that it wasn't union action that caused the 40-hour week, it was all in-house. The unions demanded they do something they were going to do anyway, much like public execution was outlawed only after it stopped being done. Basically the difference was that Henry Ford knew his business and was, apparently, one of the last to do so. Consider this: where would Ford have got the idea to start research on working his dudes less and paying them more, in 1902?

Err...common sense? Isn't paying them more one of the first things you'd try, if you were a trying-things kind of person? And how much observation does it really take to notice that workers get tired at the end of the day? I'm honestly a bit baffled here. What do I have to do to not have considered these things?

Consider next: where does Microsoft get the idea of burning programmers like coal? How about the monotonically rising regulatory deadweight costs?

The burden has become so high that most businesses cannot afford to work their employees at any sustainable rate. The fixed per-employee costs are simply too high. (Lodge doctors are an example of an industry choked to death.)

Every time regulatory burdens increase, new jobs come out of the money, so to speak, and their bosses have only two options: fold immediately, or overwork the grunts and fold later.

Don't forget this wouldn't work if Microsoft had to pay for the programmer's training. They'd never make back the investment. This means that when Microsoft does this, it is almost certainly destroying wealth, net.[1]

Just in case you thought the 'housing crisis' was anything more than a minor symptom. (Effective red herring, though, gotta give them that.) It was hardly a crisis, and it isn't the problem. Indeed the only surprising thing is that employment didn't collapse sooner. A triumph of hope and optimism over experience, that.

Perhaps I should explain how I know that Mr. Ford was a real expert.
Managers may seem like idiots, but especially at the top, they really aren't. At any rate, they have accountants, who can tell them that their second-biggest expense on any worker is, by far, regulation. They could have lobbied to limit regulation. Instead, they decided to toss their own workforce under the bus, wholesale. Large corporations are very fond of is a lot like sharks being fond of remora just because it happens to hurt smaller sharks more. Or: I'm sure GM's major (former?) shareholders are suffering a lot of cognitive dissonance by now. Say hi to Detroit for me if you're headed by.

I strongly suspect what Ford's real goal with his research was simply overcoming social norms. He needed those dozen years as a buttress against The National Association of Manufacturers, among others. Otherwise, he could have just tried it in one factory, and then done the rest if it worked out.

I don't even doubt that modern CEOs are experts. They're just not experts at any kind of management. (Quite good at lining their pockets, for example.) I can't even blame shortsightedness, because Ford's strategy was a short-term win as well.

Summary: No job? Probably the government's fault, and almost nobody will call them on it. Housing's a red herring, a minor symptom. The main problem is negative-wealth businesses (and maturity transformation) and regulation ensures we get a steady supply of new worthless businesses. Henry Ford clearly knew his stuff, something that modern managers do not.

[1] And yet profiting in money who can blame them? The government effectively outlawed being not-evil, by giving huge advantages to the bad guys. Exploit the system or be destroyed.

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