We talked about how the structure of our upbringing teaches people to be passive and choose from choices offered from them, rather than creating their own, better choices.
But that’s only part of the equation. The other question is: How is our leadership created?
For this we must look at the structure that sorts out leaders from the rest of us. Today I’ll write about corporate leadership
A corporation exists to create a profit. It has no other innate purpose, this is embedded in the law. The corporation is structured so as to remove liability for criminal acts from its owners, and, in practical terms, it also somewhat shields those who control it (its executives and corporate officers) from liability for their actions.
A competitive market is one in which profits are steadily pushed towards zero. If anyone can do what you do (freedom of entry), if there are no information barriers (patents, copyright, secrets) and there are no scale advantages others cannot also achieve, there is no reason why any product or service you create cannot be copied by someone else, who then undercuts you if collusion is not allowed.
To make consistent profits higher, then, than inflation plus the rate of growth of the economy requires that you not be in a competitive market. This is explicitly recognized in strategic thinking, that in a fair market, there are no competitive advantages, and that therefore you need to create an unfair advantage.
Anything another company does which increases their profits, no matter how unethical, if not forbidden by effective law (as opposed to theoretical, aka. unenforced law) you must also do.
What is important about this is that the drive for profits above all and the requirement to gain an unfair advantage as dictated by modern strategic thinking (there are other ways to create an advantage that aren’t unfair, but that’s not what most companies concentrate on) means that you have to do evil. If your competitors use cheap conflict metals from the Congo, the control of which is gained by mass campaigns of rape, you must do so. If an insurance company denies healthcare to people who are desperately sick, it makes more money. If a power company doesn’t spend money on anti-pollution equipment, or dumps untreated effluents rather than treated ones, it makes more money. If a clothing manufacturer doesn’t spend money on safety equipment for its highly flammable factories, it makes more money.
It is also in the interest of corporations to create barriers to entry: to enforce stringent patents and copyrights; to ask regulators to say that only some banks get access to the Fed window, giving them a massive advantage over others; to buy politicians who can use public money to subsidize them or bail them out; to insist that money go to them for bailouts rather than to ordinary householders, and so on.
At the lower executive level, the more you can get out of your employees, no matter how you do it, the more likely you are to be promoted. And fear, terror and cost-cutting, while they aren’t the only way to do this, are easier to sell to higher management and pay back faster. When they backfire in the long run, as is often the case, well, you’ll be gone, because you’ll have been promoted.
This leads to the common observation that corporate life is about the next quarter or year, not the next decade. What matters is how much profit you’re making now and next quarter, especially to your chances of promotion, not what will happen in the future. Corporate capitalism is largely incapable of planning more than a few years out, certainly not decades (there are exceptions, but even those exceptions, like insurance companies, have been losing that ability.)
High compensation is also an issue. Once you ascend to the senior corporate ranks, your bonuses are based on short term performance and are large enough that after a few years, and sometimes just one, you have enough money you’ll never have to work again. So you don’t care about the long term, because you don’t need the company to be there long term, only to make as much money as fast as possible.
As a low ranked boss, you terrorize your employees, treat them badly in whatever way is required to make short term profits and are promoted upwards. As a high level executive you make strategic decisions that require you to hurt people you’ve never met through pollution, failing to invest in safety, or political corruption.
The summary of all this is that the structure of your life, of incentives, in the corporate world, sorts out people who are willing to hurt other people, now and in the future, for their own benefit and to corrupt their own system of government and law for short term advantage. If you aren’t willing to do these things, you are unlikely to rise far in a modern corporation, and almost certain not to make it to the CEO level.
It is not that there are no other ways to run economic organizations, and it is not even that these things are necessary to gain a sustained economic advantage, but these appear to our current corporate leadership to be the easiest and quickest ways to make money. It’s simple to make the argument “if we cut wages and make people work like dogs, our profits will go up.” It is hard to make the argument “if we raise wages and treat our people well, our profits will go up”, even though the second is true. And much of modern economic life is a hostage situation: if company A is using metals created through the terror of mass rape, well, you’re at a disadvantage if you don’t too.
Strong and ethical government takes those hostage situations off the table, but when you’ve bought out government, that’s no longer possible, so you feel compelled to do evil.
People with strong ethical foundations will eventually balk. There will come a point where they will say “no, I’m not doing that, I’m not rewarding people who rape hundreds of thousands of people by buying their blood-drenched minerals”, and that’s the end of their promotions.
Even people with weak ethical foundations may eventually say “that’s just too much, I know these employees and they’ve been loyal to me and I’m not laying them off.” End of that person’s career.
The end result of this is Jamie Dimon. You wind up with people who, if they aren’t clinical sociopaths and psychopaths, act like them. At best they care for a few people close to them, their family and friends, and they hurt everyone and anyone else around them as necessary to get ahead. People who get off on it are probably at an advantage, taking joy in your work is a competitive advantage after all: love what you do!
This isn’t necessary, in an economy where we decide to take certain behaviours off the table by agreement, legislative or ethical. It isn’t necessary from an ideological point of view, since there’s plenty of evidence that happy employees are more productive, and it isn’t necessary even from a theoretical point of view because even very light protection of works plus happy employees allows you to create a sustained economic advantage by just creating teams of people who are better than the opposition rather than winning because they have a positional advantage.
But it is how we’ve chosen to do things. Our society elevates functional sociopaths and psychopaths because that is not just the behaviour we reward, it is the behaviour we demand.