Tag Archives: Corporation

The Quest for a Life of Leisure: Prisoner’s Dilemma in Food Production

In a conversation about “vegan food in the workplace,” I heard a thoughtful comment that reminded me of the Prisoner’s Dilemma. Before I paraphrase the comment, here’s a quick video to refresh your memory on the Prisoner’s Dilemma:

So, now that we have a better understanding of the Prisoner’s Dilemma, let’s get back to the comment. Essentially, the person was making the argument that large-scale commercial agriculture and farming is unsustainable, harmful to plants, and harmful to animals. The person was making the point that this problem stemmed from the business models/practices required to sustain them (and not the animals/plants themselves). Further to the person’s point, they explained that we also play a part in this by the way we purchase food. Regardless of whether we buy local, wild-caught food or buy large-scale commercialized food, there’s still an impact on the environment.

Upon hearing this comment, the first thing I thought of was the Prisoner’s Dilemma. Let me explain. There’s a demand for food. Consequently, businesses will satisfy that demand by supplying food. [Econ 101, amirite?] But how businesses satisfy that demand is where things get tricky. They could do so in a number of ways, but let’s simplify it into two: large-scale commercial agricultural production or small-scale local farming. If businesses were to focus on small-scale local farming, they’d be supplying food for the town (or maybe the town and some neighbouring towns). Businesses that focus on large-scale commercial agricultural production aren’t supplying food for a town, they’re supplying food for a country or – countries.

The two-by-two that I see here is that if businesses “cooperated,” they’d be supplying food for the local town(s) and “everyone” would be satisfied (consumers get food, businesses make money, environment is ‘harmed’ as little as possible, etc.). The possible hitch here is that businesses see an opportunity to make more money, so they scale up production into a major agricultural conglomerate (i.e. food for countries). That’s not to imply that this is “bad,” just that the opportunity exists and many businesses seek to seize it. In so doing, that provokes other businesses to do the same – the businesses are “betraying” each other, leading to externalities borne out by things like the environment. [NOTE: I’m aware that this example is very oversimplified and does not represent the state of food in all countries, especially where food shortages exist.]

The irony of the race-to-the-bottom is that, often times, the people running these businesses are all in it for the same thing:

An American businessman was standing at the pier of a small coastal Mexican village when a small boat with just one fisherman docked. Inside the small boat were several large yellowfin tuna. The American complimented the Mexican on the quality of his fish.

“How long it took you to catch them?” The American asked.

“Only a little while.” The Mexican replied.

“Why don’t you stay out longer and catch more fish?” The American then asked.

“I have enough to support my family’s immediate needs.” The Mexican said.

“But,” The American then asked, “What do you do with the rest of your time?”

The Mexican fisherman said, “I sleep late, fish a little, play with my children, take a siesta with my wife, Maria, stroll into the village each evening where I sip wine and play guitar with my amigos, I have a full and busy life, senor.”

The American scoffed, “I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds you buy a bigger boat, and with the proceeds from the bigger boat you could buy several boats, eventually you would have a fleet of fishing boats.”

“Instead of selling your catch to a middleman you would sell directly to the consumers, eventually opening your own can factory. You would control the product, processing and distribution. You would need to leave this small coastal fishing village and move to Mexico City, then LA and eventually NYC where you will run your expanding enterprise.”

The Mexican fisherman asked, “But senor, how long will this all take?”

To which the American replied, “15-20 years.”

“But what then, senor?”

The American laughed and said, “That’s the best part. When the time is right you would announce an IPO (Initial Public Offering) and sell your company stock to the public and become very rich, you would make millions.”

“Millions, senor? Then what?”

The American said slowly, “Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take a siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos…”

And maybe that life of leisure is closer than we think or, maybe, as the above parable suggests, we had that lifestyle before we “betrayed” each other in the Prisoner’s Dilemma. In an article I read recently in The Atlantic [Emphasis Added]:

The Ju/’hoansi [of Namibia] not only managed to feed themselves better than many in the industrialized world, but that they did so on the basis of only around two hours foraging a day, and cheerfully spent the rest of their time on more leisurely pursuits such as napping, playing games, and making art.

[…]

Over time, a more sophisticated picture of the Ju/’hoansi’s affluence emerged—one I saw firsthand living in southern Africa for 25 years and one I describe in my recent book. The Ju/’hoansi had an unyielding confidence in the providence of their environment and in their knowledge of how to exploit it. This meant that the Ju/’hoansi, like other hunter-gatherers, focused almost myopically on the short term—if the environment always supplied food and materials and the seasons were broadly predictable, what point was there in worrying about the future? This confidence also meant that the Ju/’hoansi did not store food for more than a few days and only expended energy on securing just enough to meet their immediate needs.

The Ju/’hoansi shared their food with one another according to a set of social prescriptions that ensured pretty much everyone, including the young, old, or disabled, got a share. As a result the Ju/’hoansi were also thoroughly egalitarian, mercilessly ribbing anyone that developed delusions of grandeur and seeing no point in accumulating wealth or formalizing systems of exchange.

NOTE: This was cross-posted.

If You Want a Successful and Sustainable Company, Focus on the Workforce

Several months ago in one of those posts where I write about a bunch of ideas, but don’t flesh any of them out, I wrote the following:

Focus on Labor — I’ve never been the CEO or a highly placed Vice President of a company, but from an outsider’s perspective, I always have a hard time understanding the lack of focus on the labor force. At times, it really looks like labor is the key to success. If the labor force is well taken care of, production and profits tend to do well. It reminds me of that post I did about sustainability and pitchers. The relation here is that when management takes care of the labor force, it is with an eye towards long-term sustainability.

I still believe that this is an important idea. Without the workforce, where would a company’s profits be? Without the workforce, where would the economy be? Even after the rise of the robots, I still think it’ll be really important for companies to take care of their workforce. It turns out, I’m not the only one with this opinion.

From Henry Blodget, CEO and and Editor of Business Insider:

If you watch TV, you’ll be led to believe that the problem with the U.S. economy is that one political team or the other is ruining the country.

A sharp drop in government spending this year is, in fact, temporarily hurting economic growth, but that’s not the real problem.

The real problem is that American corporations, which are richer and more profitable than they have ever been in history (see chart below), have become so obsessed with “maximizing short-term profits” that they are no longer investing in their future, their people, and the country.

This short-term greed can be seen in many aspects of corporate behavior, from scrimping on investment to obsessing about quarterly earnings to fretting about daily fluctuations in stock prices. But it is most visible in the general cultural attitude toward average employees.

Employees are human beings. They devote their lives to creating value for customers, shareholders, and colleagues. And, in return, at least in theory, they share in the rewards of the value created by their team.

In theory.

In practice, American business culture has become so obsessed with maximizing short-term profits that employees aren’t regarded as people who are members of a team.

Rather, they are regarded as “costs.”

And “costs,” as we all know, are supposed to be reduced as much as is humanly possible (except the “costs” of the salaries of senior management and investors–those are supposed to be increased).

Bingo! Mr. Blodget hits the nail on the head. Regarding employees as costs is a fundamental mistake in thinking. As we know, our words are important. Not only for ourselves, but for those around us. He continues:

Whenever you suggest to folks that it doesn’t have to be this way, that some companies can and do balance the interests of shareholders with the interests of customers and employees–and, in so doing, create a symbiotic relationship that supports all of these constituencies–folks call you a “socialist.”

This is a strange insult, because the government has nothing to do with this. But, nevertheless, “socialist” is the label you get branded with if you suggest that the senior managers and owners of America’s corporations should share more of their vast wealth with the employees who create it.

This view of capitalism is that it is a sort of Lord-Of-The-Flies economic system in which the only consideration should be “every man for himself.” In this style of capitalism, leaders do not manage teams and organizations in a way that creates value for everyone–customers, shareholders, and employees. Rather, in this style of capitalism, a handful of winners extract as much value as they can from hapless losers who don’t have the skills, knowledge, or time necessary to “demand a raise” or “go get a better job.”

It doesn’t have to be this way.

There is no capitalist law that says companies have to view employees as “costs” and pay them as little as possible.

Senior managers and owners can choose to share more of a company’s wealth with the people who generate it. They can choose to make only reasonable profits, while still generating compelling financial returns. And they can choose to pay their team-mates living wages instead of viewing them as “costs” and extracting every penny of possible value from them.

If American corporations were struggling to earn money these days, we wouldn’t be having this conversation.

But they aren’t.

American corporations have the highest profits and profit margins in history.

American corporations can afford to pay their employees better, hire more employees, and invest more in their future and the country’s future.

But American corporations aren’t doing that.

Instead, American corporations are choosing to divert as much of their value as possible to their owners and senior managers.

Doing this is not a law of capitalism.

It’s a choice.

And it is a choice, unfortunately, that is destroying America’s middle class, robbing American consumers (a.k.a., “employees”) of spending power, and, ironically, hurting the growth of the same corporations that are making this choice.

If your customers are strapped, your company can’t grow.

And, right now, American companies are choosing to impoverish their customers (employees), while skimming off as much wealth as possible for themselves.

The idea of viewing employees as costs is perfectly in keeping with the idea that the US doesn’t require any paid vacation daysWhat kind of a company do you want to work for: one that treats its employees as assets or one that treats its employees as liabilities?