Sunday, April 11, 2010

Why Corporations Suck

Returning to the ever-popular “Why Things Suck” series (and perhaps one day I’ll do a post on our fascination as Americans—perhaps even as humans—with “the rant”), the first thing I’m going to do today is remind you of the title of this blog. Because, the truth is, I don’t think corporations suck. So you should definitely not read the blog of anyone who’s so stupid he can't even get his titles right.

I actually ran my own business—Barefoot Software—for several years (from 1992 to roughly 2004), and it was a corporation, and it most assuredly did not suck. In fact, the birth of my business preceded the birth of my first child by several years, and I often refer to it as my eldest. Barefoot Software is still around, technically, even though no one really brings any money into it any more, and I still think of it very fondly. I often say that Barefoot is not dead, it’s just in a coma, and one day it will wake up, confused by the invention of Flairs, and promptly start having psychic visions. So I can’t say that corporations suck any more that I could say that human children suck (I have a couple of those too). Corporations definitely do not suck.

Publicly-traded corporations, on the other hand ... they suck. Hard. And I doubt I’m telling anyone anything revolutionary. At this point, even the most hardcore free-market advocates have had their enthusiasm tempered by the fact that the unfettered free market recently ate their retirement funds. Heck, even most of the people working on Wall Street for the corporations agree that they suck. Not the CEO’s of course—they got their multi-million dollar bonuses for nearly bankrupting their companies, so I’d imagine that they think corporations rock—but practically everyone else. And it’s not just the bankers: the auto-makers, the oil companies, the health insurers ... it’s hard to turn on/pick up the news outlet of your choice these days without learning more about how much publicly-traded corporations suck. There is, after all, a reason why Dilbert is the most popular comic to come along in 20 years. (Or 30 ... actually, probably closer to 50 at this point.)

So, other than to point out that you really should not be reading this blog, why make a point that everyone already recognizes? Because we don’t. Sure, we say we do, but we don’t actually believe it. What we really believe is that all the other corporations suck. (Actually, how much we think our own corporation sucks probably depends on how far up or down the corporate ladder we happen to be, but you see what I’m getting at.) Outside of really blatant cases (perhaps Enron-level examples), most people running corporations don’t think their corporations suck, because, if they did, they’d run them differently. And they don’t, so they must not. People like that do have stock portfolios, though, so I can’t believe they are oblivious to the great suckitude; they just think it doesn’t apply to them.

I see a weird sort of parallel to conspiracy theories here. Everyone knows that conspiracy theories are ridiculous, because large entities (governments, corporations, religions, etc) can’t keep secrets. Anyone with any experience at all in trying to keep something secret knows that the more people who know something, the slimmer the chance that it won’t get leaked. There really just isn’t any chance whatsoever that a large group of people can intentionally keep other people from finding out something.

But the problem, of course, is that word “intentionally.” And the problem with pooh-poohing conspiracy theories is that you think they require conspiracies. The concept of a bunch of people getting together and purposefully agreeing to do something shady and managing to keep it a secret for decades is of course ludicrous. But, unfortunately, things can quite often stay quiet without any conspiracy whatsoever. All you need is for the majority of people who could talk about it to get into serious trouble if they do. ‘Cause let’s face it, if the first person to speak up is going to get their head lopped off, then I think you can count on not a lot of people finding out. And it will eventually get to the point where enough people have stayed silent for long enough that even when someone does come along and sound the alarm, no one will believe them. Because, hey, that can’t possibly be true, because, if it were, everyone would know about it, right?

Don’t believe me? Do you know who Bernie Madoff is? Almost certainly you do. Do you know who Harry Markopolos is? Almost certainly you do not. Likewise, you probably have heard of some recent financial troubles we’ve been having, and you probably have not heard of Michael Burry. And these are just a few minutes’ work Googling current events. If you were to dig, you could find hundreds if not thousands of other historical examples. Quite simply, when people’s jobs are at stake, things can stay secret quite well, thank you.

Now, how does this parallel the situation with publicly-traded corporations? Well, obviously, all the employees of these public companies, from the top to the bottom, have an interest in keeping their jobs. Now, the lower down the ladder you are, the more likely you are to be fearless enough to risk that job, but, then again, the lower down you are the less power you have to do anything significant about it. Let me tell you a story that I heard fairly recently. It’s completely anecdotal, and possibly apocryphal as well, but it’s such a good story that I’m not about to let a little thing like accuracy get in the way.

A CEO of a medium-sized tech company got tired of dealing with all the problems reported by his engineers. “The codebase is old and fragile,” they would complain. “Even the stuff that works right doesn’t really work right, if you see what I mean, and every time you try to fix one thing you break three others.” Finally the CEO put his foot down. “No more new features!” he proclaimed. “For the next year, we’re going to put a moratorium on new functionality and concentrate on just refactoring and rewriting and getting our codebase into a state where we can easily add new features going forward. This makes good business sense, because it allows us to be more nimble: we can respond more quickly to changing business forces and beat our competitors to market with new functionality. But we can only do that if we have a strong foundation to build on. So let’s gut the house and relay the foundation, then build it back up the right way.” Everyone applauded this bravery. No doubt the engineers cheered the loudest of all. I can tell you from experience that engineers hate working on old, creaky codebases and just love the chance to rebuild them.

One year later, the codebase was brand spanking new and ready for chewing up the competition. The CEO, of course, was fired.

Now, is this story true? Who knows? It’s a classic FOAF story, and, even if not completely false, my friend may have dressed it up for me, and I cheerfully admit to dressing it up for you. But could it be true? Sure. I would be stunned to find anyone who has worked at a public company for any length of time and doesn’t recognize this story as a reflection of actual events they’ve witnessed—perhaps on a smaller scale, but basically the same story. We read article after article about how Japanese companies think about the long-term while American companies squander competitive advantages chasing short-term profits, but somehow we seem to imagine that this is some sort of cultural difference rather than seeing that the entire system is set up to encourage short-term thinking and punish long-term thinking. (Then again, Japanese companies are publicly traded too, so maybe I’m full of crap and it is all cultural.) But when I look at how few American companies last 50 years, much less 100, I can’t help but feel that there’s something inherently wrong here. It's hard to concentrate on long-term profits when you're worried about whether you're going to be around long-term. And your stockholders don't want to hear about profits that will come in long after they've sold off their invesments: they're all nicely queued up, Janet-Jackson-style, asking what have you done for them lately? Honestly, most of the companies who do manage to last for any significant length of time seem to be more monuments to momentum than exemplars of emulatable business tactics.

Once upon a time the expression was “Nobody ever got fired for buying IBM.” Then it was Microsoft. Then Oracle. But what do all these things have in common? Keeping the status quo. That’s what the expression should really be: nobody ever got fired for keeping things exactly the way they are (not 100% true, perhaps, but close enough for government work, as my grandmother used to say). People get fired for trying to change things all the time though. Our system—the system of publicly-traded corporations—doesn’t reward bravery, or daring, or even keen insight. It rewards soul-crushing sameness, and playing it safe, and fear of change. That’s why corporations suck ... but only if they’re publicly traded.

When I was in charge of a corporation (very small one that it was), I was never afraid to make a mistake. Making mistakes is, after all, how one learns. What I was afraid of was making the same mistake twice, ‘cause that’s just stupid. It seems to me that corporate America not only makes the same mistakes over and over again, it revels in it, and rewards its minions for doing so. I would be pleased to be wrong about that. But I don’t think I am.

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