Small Is Beautiful. Large Is Profitable. Sometimes.
Remnant Review (Sept. 1, 2012)
A site member has asked a lot of questions. They are all worth answering.
I'd like some help starting this research. I've read a few books from the left talking about the dangers of a large corporation and its concentration of power. Here is my assumption: Christianity started based on the planting of organic cells of believers. Each of those cells (churches) was largely independent and held together (literally in my opinion) by the Spirit of God and by a BASIC set of beliefs.When Christianity became consolidated in the Catholic church, it eventually led to abuses that needed to be reformed. We see the same thing in business. Large corporations tend to run roughshod over individuals. Wal-Mart comes to mind with its army of part-time workers. Foxconn comes to mind with its suicide nets.
My basic belief is that "BIG" is a bad thing. You could say the same thing about the large U.S. federal government. But is there real research to back up this belief? I'm starting with this assumption, but is that even the right starting point?
I heard the founder of Staples this morning waxing poetically about how Bain Capital helped a day care center, Bright Horizons, grow into the "largest employer-based daycare chain in the country." I immediately recoiled. http://www.baincapitalventures.com/portfolio/company/bright-horizons/
Dr. North's advice on daycare centers notwithstanding (I agree with him but I don't want this thread to go down that path), why is bigger better for daycares? What "efficiencies" are we creating in the care of children? These are human beings, not warehouse inventory. The core of me doesn't believe bigger is better. Why have we gone down this path?
As a corollary, why aren't people convinced that a loosely organized confederation of small, independent, wealth sharing business are better than a large business where all of the wealth is concentrated at the top?
"Total direct compensation for 248 CEOs at public companies rose 2.8% last year, to a median of $10.3 million, according to an analysis by The Wall Street Journal and Hay Group. A separate AFL-CIO analysis of CEO pay across a broad sample of S&P 500 firms showed the average CEO earned 380 times more than the typical U.S. worker. In 1980, that multiple was 42." - http://tinyurl.com/96yzrq2
A few other links to aid in the discussion:
http://en.wikipedia.org/wiki/Executive_pay
http://tinyurl.com/98pbq73
http://www.epi.org/publication/wp293-ceo-to-worker-pay-methodology/These are my questions: Why do people praise a Wal-Mart that puts small businesses out of business and basically enslaves the workforce to "efficiency?" Why do people love Bright Horizons but scoff at local daycare options? I know people don't buy based on morals. I don't shop at Wal-Mart, but I sure did buy an iPad. Unless one does the research, you don't see the hidden costs borne by the underpaid labor that made those nike shoes or new laptop as "inexpensive" as they are.
A few more examples.
It feels like everywhere I turn, smaller is better and "BIG" is evil. - Purdue chicken: factory grown, lots of disease countered by lots of anti-biotics. Free range chicken from smaller farms is better.
- Pharmaceuticals: multiple drugs that kill people managed to pass the FDA screening as "safe." Natural alternatives are suppressed. Example: Nutrisweet= rat poison. Stevia, which is about 25 times sweeter than sugar, is censored by the FDA from being sold as a sweetner.
- Automobiles: The Tucker sedan's innovations were attacked by the Detroit automakers even though those innovations were eventually added years later due to market demand.
I guess I just want to see some research about organically grown businesses without a centralized authority. It's an ethic and I don't think you can legislate it into existence. I know this is long, but I would deeply appreciate any answers.
How would you respond? How would you go about responding?
My advice: always start with Smith and Jones. Then work outward. This will keep you from making big mistakes. Don't start with the big picture. Start with the small picture.
Let us begin.
I'd like some help starting this research. I've read a few books from the left talking about the dangers of a large corporation and its concentration of power. Here is my assumption: Christianity started based on the planting of organic cells of believers. Each of those cells (churches) was largely independent and held together (literally in my opinion) by the Spirit of God and by a BASIC set of beliefs.
Let us start here. Two people decide to worship together: Smith and Jones. They are under God individually. They are not yet in communion. They join together legally. This is called a church covenant. It is marked by a common confession of faith, baptism (once), and the Lord's Supper as a recurring act of covenant renewal.
Then came Brown. Then came Brown's friend, Wong. Their wives came, too. Then they all had lots of children.
Then they all died. So did their children. But the church did not. Why not?
Here we get to the very heart of the matter. The covenantal bond had a separate legal existence from the people who made those bonds. The church extended through time as a legal entity before God. It was responsible to God. It was also responsible to the members. There was top-down authority -- God to individuals. There was bottom-up authority: they joined together. Then there was a new top-down authority: God to the church. There was bottom-up authority: church to God.
By the way, we can discuss marriage the same way, with this exception: there is no judicial act of covenant renewal in marriage. Put bluntly, Christianity does not make sexual union a sacrament. Some pagan religions do, which is why there have always been temple prostitutes.
Let us continue.
When Christianity became consolidated in the Catholic church, it eventually led to abuses that needed to be reformed.
The same applies to every institution. There is nothing unique in this regard about churches.
We see the same thing in business. Large corporations tend to run roughshod over individuals. Wal-Mart comes to mind with its army of part-time workers. Foxconn comes to mind with its suicide nets.
Here is where the error begins. First, what is unique about corporations? Second, has not every reformer said this of the target of his reform?
Do pastors run roughshod over members? Sometimes. Do members run roughshod over pastors? Frequently. What is the solution? Quit. Join another church.
"Quit" is a great four-letter word in business and in most other institutions. It allows dissatisfied people the right to do better elsewhere.
This is not the correct solution for families. But modern people think it is. Divorce is widespread.
My basic belief is that "BIG" is a bad thing.
Then his God is too small.
The central doctrine of the Trinity -- shared by no other religion -- teaches that God is both one and many. Jews and Muslims understand this, and they reject Christianity as polytheistic. Christians have always denied the accusation. But to do this, they must afford God's underlying unity.
The moment a Christian affirms the many -- smallness -- at the expense of unity -- bigness -- he has implicitly confirmed the accusation of Jews and Muslims. Christianity is seen as ultimately polytheistic, and this is manifested in a preference for the many over oneness, for diversity over unity.
Always, Christian orthodoxy has affirmed the equal ultimacy of the one and the many. This has shaped Christian social theory. For two books on this, see R. J. Rushdoony, Foundations of Social Order: Studies in the Creeds and Councils of the Early Church (1968), and Rushdoony, The One and the Many: Studies in the Philosophy of Order and Ultimacy (1971).
So, in affirming smallness over bigness, the site member has adopted a form of social polytheism. It is unlikely that he has thought through the social implications of Trinitarianism. Few Christians have.
You could say the same thing about the large U.S. federal government. But is there real research to back up this belief? I'm starting with this assumption, but is that even the right starting point?
It is not. The issue is never size as such. The issue is always the efficiency of social arrangements within the environment of individual sanctions, which includes profit and loss, but which are much more comprehensive than the market. The key is the system of sanctions, not size as such.
I heard the founder of Staples this morning waxing poetically about how Bain Capital helped a day care center, Bright Horizons, grow into the "largest employer-based daycare chain in the country." I immediately recoiled. http://www.baincapitalventures.com/portfolio/company/bright-horizons/
Why recoil? First, where is the evidence? I see a few daycare chains. They are not all that efficient.
I know a man who in 2001 owned 22 day care facilities -- the buildings, not the operations. He leased them to chains. I asked him what the #1 problem is in operating a day care. "Management," he said. Then he quoted a great aphorism: "Farmers say that the best fertilizer is the owner's shadow." There is no chain that can compete against a well-managed, locally owned or family owned day care.
Dr. North's advice on daycare centers notwithstanding (I agree with him but I don't want this thread to go down that path), why is bigger better for daycares?
There aren't many.
What "efficiencies" are we creating in the care of children? These are human beings, not warehouse inventory. The core of me doesn't believe bigger is better. Why have we gone down this path?
The site member starts with a false premise, one uttered by some dolt who does not run a day care. This is unwise.
As a corollary, why aren't people convinced that a loosely organized confederation of small, independent, wealth sharing business are better than a large business where all of the wealth is concentrated at the top?
He is upset at the results of Pareto's law. Sorry, but that is a wasted effort. Every social reformer who starts with the premise that the 20-80 distribution is immoral will spend his life frustrated. No social order has ever replaced it with anything like 50-50. No large institution has replaced it. Get over it.
"Total direct compensation for 248 CEOs at public companies rose 2.8% last year, to a median of $10.3 million, according to an analysis by The Wall Street Journal and Hay Group. A separate AFL-CIO analysis of CEO pay across a broad sample of S&P 500 firms showed the average CEO earned 380 times more than the typical U.S. worker. In 1980, that multiple was 42." - http://tinyurl.com/96yzrq2
This is easily solved. Those who are upset can sell their shares. If lots of owners do this, the share price will fall. Those at the top will lose.
If this distribution is inefficient, then it will fail. If it is efficient, it won't. Owners should decide. The owners are those who own the shares. These are mostly large institutional investors, acting as agents of individual investors.
Why does anyone who is not an owner think his wisdom is greater than the owners' wisdom? It's their money.
This is the heart, mind, and soul of every critic of the free market. "My wisdom is greater than the owners' wisdom."
The question then is this: Who cares what the critic thinks? Not customers. Not share owners. Not workers. Who?
Politicians. "Vote for me, and I'll fix it." No, he won't.
These are my questions: Why do people praise a Wal-Mart that puts small businesses out of business and basically enslaves the workforce to "efficiency?"
Customers.
Why do people love Bright Horizons but scoff at local daycare options?
Where is evidence that they do?
But, in any case, if families and churches refuse to start them, why blame Bright Horizons? You can't beat something with nothing.
I know people don't buy based on morals.
Usually, morals are not an issue. So, people buy in terms of price, convenience, or something else that they prefer.
I don't shop at Wal-Mart, but I sure did buy an iPad. Unless one does the research, you don't see the hidden costs borne by the underpaid labor that made those nike shoes or new laptop as "inexpensive" as they are.
I detect the reformer's assertion: "I know what is good for workers. Workers don't know what is good for them. We must get the state to establish work rules. The state should establish minimum wages." If this is not the underlying goal, then let customers decide.
They have decided. Wal-Mart is huge. It came out of nowhere -- Bentonville, Arkansas -- to take over the walk-in retail world. What it does not control, Amazon does.
A few more examples.It feels like everywhere I turn, smaller is better and "BIG" is evil.
Evil. This is a gigantic claim. It is most often the claim of a man who claims that he is speaking for God. He is saying that he knows better than customers do. I ask: On what universal moral basis is big inherently evil, or is anything inherently evil? I need logic. I want proof. I ask this: "By what standard?"
- Purdue chicken: factory grown, lots of disease countered by lots of anti-biotics. Free range chicken from smaller farms is better.
There are courts. Let victims sue.
- Pharmaceuticals: multiple drugs that kill people managed to pass the FDA screening as "safe." Natural alternatives are suppressed. Example: Nutrisweet= rat poison. Stevia, which is about 25 times sweeter than sugar, is censored by the FDA from being sold as a sweetner.
Abolish the FDA. Rely on insurance companies to police the insured. If this fails, organize class-action lawsuits. But there should be this provision: those who lose pay all court costs of the winners. This is the British system.
- Automobiles: The Tucker sedan's innovations were attacked by the Detroit automakers even though those innovations were eventually added years later due to market demand.
From Wikipedia.
The world premiere of the much-hyped Tucker '48 car was set for June 19, 1947. Over 3,000 people showed up at the Tucker factory in Chicago for lunch, a train tour of the plant, and the unveiling of the first Tucker prototype. The unveiling appeared doomed, however, as last-minute problems with the car cropped up. The night before the premiere, two of the Tin Goose's independent suspension arms snapped under the car's own weight. (The Tin Goose was extremely heavy; much heavier than the other Tucker '48's.) Minor engine problems were fixed, and the car was presentable by the time of the premiere. However, the experimental 589 engine was extremely loud. Tucker told the band to play as loud as possible to drown out the noise.
Ultimately, the federal government destroyed the firm. But customers might have decided not to buy. We don't know.
One of Tucker's most innovative business ideas caused trouble for the company, however. His Accessories Program raised funds by selling accessories before the car was even in production. After the war, demand for new cars was greater than dealers could supply, and most dealers had waiting lists for new cars. Preference was given to returning veterans, which meant that non-veterans were bumped down on the waiting lists indefinitely. Tucker's program allowed potential buyers who purchased Tucker accessories to obtain a guaranteed spot on the Tucker dealer waiting list for a Tucker '48 car.This concept was investigated by the U.S. Securities and Exchange Commission and the United States Attorney, and led to an indictment of company executives. Although all charges were eventually dropped, the negative publicity destroyed the company and halted production of the car.
The federal government is too big. When the Great Default arrives, it will get smaller.
I guess I just want to see some research about organically grown businesses without a centralized authority. It's an ethic and I don't think you can legislate it into existence. I know this is long, but I would deeply appreciate any answers.
Let me provide some answers.
MAINTENANCE VS. GROWTH
The free market social order solves the problem of reconciling the one and the many better than any other known social system. This is because there are both positive feedback and negative feedback systems in the market process. The sanctions are profit and loss.
When an entrepreneur believes that customers in the future will be willing to pay him a particular price for his product, he then makes estimates as to how much it will cost him to get his product into the hands of customers. He is making fundamental decisions about the size of his operation. He has to be very careful not to let it get too big, because costs will undermine its profitability. The larger an organization gets, the more expensive it is to maintain communications within it. Also, the more expensive it is to arrange transactions within the company.
For example, a company probably does not have a program for each department to sell its services to another department. If each department were an independent contractor, this would be possible. This is one of the reasons why businesses spin off subdivisions and make them separate organizations. It is possible for the new organization to sell to outside agencies, and this is also a way to monitor profits and losses within that subdivision. It keeps the costs of operating the subdivision lower, because there is a reliable guide available to management to assess whether or not the firm is meeting a market efficiently: profit and loss.
Whenever a department does not face an external market, there is the problem of the expansion of employment and resources within the organization. Every department chairman wants to make more money, hire more employees, and therefore gain more prestige in the organization. He is constantly seeking for ways to expand the number of purchases within the department.
At the same time, the company is attempting to restrict the expansion of expenditures within the various departments. So, in the feedback between senior management, which wants to cut costs, and lower management, which wants to expand operations, there is constant tension. It becomes more and more expensive as an organization gets larger to keep a proper balance between expansion, which is expensive, and maintenance, which will eventually lead to the destruction of the company, because you always have to add new customers. You cannot run a company exclusively on expansion, and you cannot run it exclusively on maintenance. Usually, Pareto comes in to play here: 80% maintenance, 20% innovation.
In churches, the same kinds of problems exist. Churches are constantly looking for ways to expand their expenditures. The pastor may want a larger parking lot: one acre for every 100 adults. A pastor may want another assistant pastor: lower work load. He may want to install a new sound system. There is always more money to spend there is money available. So, there is a constant tension internally.
Pareto's law comes into effect. Most American Protestant churches average about 100 adult members. But, consistently, 20% of the churches in the community will have 80% of the members. The mega-church is basic to society, because Pareto's law is basic to society. If people want to belong to a large church, who is to say that they shouldn't? On the other hand, if other people want the intimacy of a smaller church, they can get this.
MONEY TALKS
In a free society, the person who holds the major sanction is the person with money. This is the customer in a business relationship, and it is a member in a church relationship. Most members do not tithe. The church usually finds that 20% of its members donate 80% of the money. This is standard, and we should expect nothing different.
The question of how large an organization should be is completely dependent on the reconciliation of the one and the many within the organization. In most cases, it is the person who holds the checkbook who makes the decisions. The customer either buys or does not buy from a particular company. The potential church member joins one church and not another. He pays his money to the church that he joins. In the first case, the customer is in a position of authority, because he has ownership of the most marketable commodity: money. In the second case, the church member also possesses money. He decides who is going to get his money. Churches rise or fall in terms of the decision of their members to continue donating. So, the size of the organization is ultimately set by the agent in the organization who controls the purse.
The question of size is not determined by some overarching principle. It is determined, day by day, by the decisions of those people who fund the organization. They are the sovereign agents in the arrangement. If the managers decide to do something that is not acceptable to the people who write the checks or get out their credit cards, then managers will find the organization begins to shrink. Profits begin to fall. Donations begin to fall.
Those at the top in terms of judicial authority are dependent upon the people at the bottom who have the money. The people at the bottom have the economic sanctions, so the people at the top are completely dependent upon the people at the bottom with the money for their own positions of authority. They may issue the rules, but if customers do not buy, or if members resign from the church, the people at the top will oversee a shrinking organization. Either they will change, or else they will find replacements for the people who refused to change at the bottom.
In short, money talks. Reformers can scream, yell, and roll on the floor or the grass until they turn blue, but they cannot change two things: money talks, and Pareto's law rules.