Cocksure

 

"The trouble with the world is the stupid are cocksure and the intelligent full of doubt."

--Bertrand Russell

Bertrand Russell

That quote has been on the banner of this blog since its inception and it kept welling up in my brain as I read "The Man Who Broke Capitalism," by David Gelles about Jack Welch, the longtime CEO of General Electric.

Jack Welch

Jack Welch was a small man from a small town, Peabody Massachusetts, who studied chemistry in college and rose to be the CEO of what was at the time the most important company in the world.

He was a man certain of his own greatness and firm in his convictions and he thought he knew what the rest of the 20th century was going to look like.

Welch came to power in the days when Ronald Reagan was decrying welfare queens and Reagan was saying it was once again alright to be rich, and when Milton Friedman was winning a Nobel Prize in economics for saying the only duty of a CEO and of any company is to make money for its shareholders. He was saying this when people were talking about "socially responsible investing" such as not investing in apartheid South Africa and they were protesting outside Dow Chemical for making napalm which was immolating Vietnamese children.

Profits for Dow Chemical 

Friedman was not the first to say stuff like this: George Bernard Shaw's Undershaft said much the same thing in "Major Barbara" and his point was your only moral duty in life is to not be poor and so he made munitions and explosives and wealth came his way. Of course, Undershaft shared his wealth with his workers and the community was richly supported by the profits from his deadly products; the rich living high on the death and destruction of the poor nations.

Milton Friedman

But Friedman said it so assuredly he got the Nobel prize. He said government had no business interfering with business under any circumstances, should never regulate business, which is always wrong and harmful to society.

I haven't read any of Friedman's books or articles, but I know all I need to know about him from a half hour interview I listened to in which the interviewer asked him about the FDA: Didn't we need to have the FDA to control the pharmaceutical industry? Nonsense! thundered Friedman. But what about all those potentially harmful drugs? The bad products will be discovered and the companies who make them will face liability suits and bankruptcy so the market will discipline them. No problem. Let the market play out. Let the stallions of commerce infuse the economy with energy.

Of course Professor Friedman was not asked about the two most telling examples of where his argument fails: 

1/ Thalidomide and 2/ Mad Cow Disease. 

Thalidomide was that drug pregnant women in England were given to control nausea and they gave birth to thousands of children who had no arms or legs before it was realized Thalidomide was teratogenic. The justice of the liability courts and the marketplace would have been cold comfort to those limbless children or to their parents.

And then there is Mad Cow Disease, caused by a prion which cannot be baked, cooked or barbecued out of the cow and when ingested by human beings takes 20 years to surface as sudden profound dementia and bed ridden immobility unto death. How does the liability court or the marketplace catch up with something like that 20 years later?

So the professor didn't have a clue. He was cocksure but stupid and wrong. The easiest thing for an absolutist to be is consistent. Consistent, but wrong.

Jack Welch decided manufacturing in America was doomed. Spending money on R&D and workers' wages is a loser's game. The easy money is in finance, credit cards and banking. You don't need to make scientific or engineering breakthroughs for that--you just print cash.

Get rid of all those workers. Cut your least productive workers--the lower 10% each year until you have no workforce, just computers issuing credit cards.

How, exactly you define "least productive" is another thing.

Suppose you had a superlative football team, wins championships every year, sort of the New York Yankees of the 1950's, the standard by which you measure all others, sort of like the General Electric of the 50's, 60's, 70's and 80's. But then you cut the least important 10% of your players after each season. What does that get you? The Washington Redskins. Or the Commanders. Or something.

But Jack Welch was a captain of industry, sure of himself, cocksure. 

He knew that the biggest drag on his company was all those lazy, entitled workers who were terminally complacent, just showed up at work to sit around and drink coffee. Sort of like welfare queens, but not living off the government, but off GE. 

Arthur T. Demoulas: A CEO for All Seasons

Contrast this with Arthur T. Demoulas, who fought off his cousins who wanted to sell out the family grocery store chain for a big pay day, vulture capitalism which would have carved up and destroyed hundreds of stores and thousands of jobs. His battle is documented in the documentary "Food Fight," and his basic article of faith was that Market Basket was not simply about who could make the most money and keep the biggest share of it. To him, this family business was about the customer and making food available at a good price, the workers and their families and communities from which they came and lastly, about making enough profit to keep the venture healthy and going, but not necessarily growing. Was Demoulas wrong, sentimental, soft headed or simply virtuous and right--that companies do not have to be simple feeding troughs for stockholders but can serve multiple purposes at once?

In Welch's eyes, he owed nothing to GE workers but the last paycheck. His only obligation was to the share holders. He bought out other companies and the first thing he did when he acquired them was to fire as many people as possible. Workers are not an asset; they are overhead. 

I've know some workers who don't want to work, but most workers I know actually care about doing a good job. But Mr. Welch knew better. So he made war on complacency and on his own workforce. He became the spider wasp of American industry: hollowed out his own company from within.

But he was cocksure. 

Me, I'm full of doubt. So what does that make me?