Archive for the ‘Business’ Category
The Onion has a good headline: “Jeff Bezos Assures Amazon Employees That HR Working 100 Hours A Week To Address Their Complaints.”
But the problem of excessive demands—i.e., exploitation of the workforce—is serious. And, as Tim Wu points out in an interesting piece in the New Yorker, it is not necessarily due to individuals in charge. The entire article is worth reading, but let me quote just his conclusions:
. . . What all of these explanations [for the excessive demands of the modern workplace] have in common is the idea that the answer comes from examining workers’ decisions and incentives. There’s something missing: the question of whether the American system, by its nature, resists the possibility of too much leisure, even if that’s what people actually want, and even if they have the means to achieve it. In other words, the long hours may be neither the product of what we really want nor the oppression of workers by the ruling class, the old Marxist theory. They may be the byproduct of systems and institutions that have taken on lives of their own and serve no one’s interests. That can happen if some industries have simply become giant make-work projects that trap everyone within them.
What counts as work, in the skilled trades, has some intrinsic limits; once a house or bridge is built, that’s the end of it. But in white-collar jobs, the amount of work can expand infinitely through the generation of false necessities—that is, reasons for driving people as hard as possible that have nothing to do with real social or economic needs. Consider the litigation system, in which the hours worked by lawyers at large law firms are a common complaint. If dispute resolution is the social function of the law, what we have is far from the most efficient way to reach fair or reasonable resolutions. Instead, modern litigation can be understood as a massive, socially unnecessary arms race, wherein lawyers subject each other to torturous amounts of labor just because they can. In older times, the limits of technology and a kind of professionalism created a natural limit to such arms races, but today neither side can stand down, lest it put itself at a competitive disadvantage.
A typical analysis blames greedy partners for crazy hours, but the irony is that the people at the top are often as unhappy and overworked as those at the bottom: it is a system that serves almost no one. Moreover, our many improvements in the technologies of productivity make the arms-race problem worse. The fact that employees are now always reachable eliminates what was once a natural barrier of sorts, the idea that work was something that happened during office hours or at the physical office. With no limits, work becomes like a football game where the whistle is never blown.
Litigation may be an extreme example, but I do not doubt that many other industries have their own arms races that create work that is of dubious necessity. The antidote is simple to prescribe but hard to achieve: it is a return to the goal of efficiency in work—fulfilling whatever needs we have, as a society, with the minimal effort required, while leaving the option of more work as a hobby for those who happen to love it. In this respect, it seems like no little irony that Amazon should be a brutal workplace when its ostensible guiding principle is making people’s lives better. There must be a better way.
In a situation such as this, a government that is by, for, and of the people and is focused on the general welfare can play a role. While no single company can afford to slack up because of competitive pressure, the government can set (and enforce—important aspect) ground rules that protect workers and level the playing field for all companies. For example, enforcing a 40-hour work week for all employees would enable companies to give their workforce time for family, rest, and activities other than work.
As an example of how this works, automobile manufacturers are required to meet certain safety standards by law. Without such laws, there would be a race to the bottom as companies cut costs by jettisoning the safety measures built into their cars. (You can see that they would by noting how strenuously and vigorously the automobile industry has fought the introduction of each safety requirement: if it were left up to them, they would never incorporate such measures for fear that their competitors would undercut them on price by having lower costs. But a law requiring the observance of such safety standards takes off the table the option of ignoring the standards, so no one can get a competitive advantage by ignoring safety.
Because of the nature of the system, however, the change probably must be imposed from without, since the companies have entered a trap from which they cannot otherwise escape.
Technology helps us all—well, all except those selling overpriced medical equipment. J.M. Porup reports in Motherboard:
Tarek Loubani, an emergency room doctor in Gaza, wants to apply the principles of open source software development to out-of-patent medical devices. His first success: A 3D-printed stethoscope head that costs 30 cents to make and, according to his tests, has better sound quality than the industry standard.
Loubani is the head of the Glia project, whose team of hackers and surgeons designed and field-tested the stethoscope. Audio-frequency response curve tests showed the device not only exceeds international standards, but offers superior sound quality compared to the industry-leading Littmann Cardiology 3.
The Littmann retails for $150-200. The Glia stethoscope, including the 3D printed head, tubing and ear piece, will cost around $5 to produce.
Loubani founded the Glia project after the 2012 Israeli invasion of Gaza. “I had to hold my ear to the chests of victims because there were no good stethoscopes, and that was a tragedy, a travesty, and unacceptable,” Loubani told attendees during a presentation at the Chaos Communications Camp in Zehdenick, Germany.
The device was tested in a process the group dubbed the “Hello Kitty” protocol. During the test, which measures how much sound is transmitted at each frequency, the stethoscope is pressed against a balloon filled with water before sound is transmitted through the balloon. The abundance of cat-branded balloons available in Gaza at the time led to that nickname. . .
Later in the article:
. . . Loubani foresees a future in which lifesaving medical devices, like dialysis machines and electrocardiograms, can be 3D printed around the world for a fraction of their former cost. Inspired by the open source software movement, he keeps all his code on GitHub and encourages doctors and hardware hackers to contribute to the project in a collaborative way. . .
The Glia team is focused on developing the three most ubiquitous and expensive medical devices—the stethoscope, a pulse oximeter that monitors blood oxygen levels, and an electrocardiogram for cardiac patients. The latter two, Loubani explains, will use “PCBs [printed circuit boards] designed to be easy for people to make in low-resource settings with simple methods like toner transfer. The housing is 3D printed.” . . .
Loubani was inspired to launch the project after testing his nephew’s toy stethoscope, and was startled to find such good sound quality.
Stethoscope prices remain high despite the expiration of fifty-year-old patents, and so he brought together a group of hardware hackers to work on the Glia model.
“I can understand why these companies charge so much,” he wrote. “[They] have no reason to undermine their profits. Why would 3M develop a stethoscope that’s as good as their $200 model but a fraction of the cost? That’s where doctors, hackers and tinkerers from all over the world take over to create these devices in a way that’s affordable and accessible.” . . .
Motherboard has another article, by Seung Lee, about how medical companies are developed stethoscope replacements with enhanced capabilities (recording the sounds, for example) and sell at much higher prices. Well worth reading.
Sharon Lerner continues the series on DuPont and C8, a toxic substance that is used to make Teflon and is now found in the bloodstream of 99.7 percent of Americans and in the environment. The current installment in the series explores the reasons the EPA failed to take action against the pollutant.
A very interesting column by Brian Merchant in Motherboard examines the trends in how corporations manage employees and finds that most are moving rapidly in the direction of the Amazon model. Well worth reading. [edit: broken link fixed – LG] You can certainly see the reasons that the culture is pushed, and you can see who benefits and who suffers adverse effects.
From the article:
“I wasn’t surprised about anything in the report, except maybe the desperation that allows workers to accept such conditions,” Douglas Rushkoff, a professor of media theory at CUNY, and the author of Present Shock, told me in an email.“But what Amazon is doing is entirely consistent with the way most companies are using digital technology. It’s a way of extracting value from humans and converting it into share price.”
Of course, working conditions like these are what gave rise to unions to begin with. In addition, government is the other force protecting employees (the public) from excessive demands. For example, the 40-hour work week, the safety requirements enforced by OSHA, and so on. But in recent decades the government has discontinued this role for a variety of reasons, including targeted budget cutbacks by Congress.
It will be interesting to see how it plays out. The numbers are on one side, power is on the other.
UPDATE: Interesting further context for the anecdote told by Jeff Bezos.
Interesting column in the NY Times by Adam Galinsky:
“Gail, I need to talk with you about something this afternoon. Can you come by my office at 3 p.m.?” I didn’t think much about my seemingly innocuous words, spoken to one of my department’s doctoral students one morning back when I was an assistant professor.
Gail showed up right on time, walking into my office with great trepidation. I proceeded to go over some small changes in a research project we were planning. After I finished talking, Gail sternly said, “Never do that to me again!”
“Do what?” I said with much confusion.
“Scare the hell out of me by saying you needed to talk to me,” she said. “I spent the whole day obsessing about whether I was in trouble.”
Initially, I thought that Gail must be particularly oversensitive. But not long after that, the chairwoman of my department, a full professor who would one day vote on my tenure case, asked me to come and see her later in the day. For the next five hours, I was consumed with fear that I had done something wrong — until we met and I learned that the topic was also insignificant.
At the time of these exchanges, I had started to study the psychological effects of power. These experiences brought me face to face with how the words of those with power loom large over those with less power. This is a phenomenon I call the power amplification effect.
The problem is that the powerful are often oblivious to their impact. Holding power, as my research shows, reduces one’s capacity to appreciate how one’s words and gestures may affect others. As I studied power and reflected on my own experiences, I realized that three types of communications become amplified by power: direct communication, silence and ambiguity.
Direct communication. When I was a first-year doctoral student, I shared an idea in class on the very first day. The professor dismissed my comment. “That is completely wrong,” he said, violently shaking his head. I was mortified.
A few weeks later I ran into the same professor as I was walking down the hall. He stopped me with a smile and said he had enjoyed reading one of my papers. “You are a lovely writer,” he said. I continued on my way but now with a skip in my step.
This example illustrates how feedback from the powerful — whether positive or negative — easily becomes amplified.
Silence. . .
The writer of this NY Times Magazine article on Amazon as a workplace—and as a microculture—that, despite the writer’s best efforts, sounds dehumanizing in the extreme and a rather overt program to work their employees to the point where karōshi is seen. From the article:
At Amazon, workers are encouraged to tear apart one another’s ideas in meetings, toil long and late (emails arrive past midnight, followed by text messages asking why they were not answered), and held to standards that the company boasts are “unreasonably high.” The internal phone directory instructs colleagues on how to send secret feedback to one another’s bosses. Employees say it is frequently used to sabotage others. (The tool offers sample texts, including this: “I felt concerned about his inflexibility and openly complaining about minor tasks.”)
Certainly there are attractive aspects (no red tape: that’s a winner simply by definition of “red tape”), but it is not a cost-free proposition—the cost to the employee’s lives and general welfare. Amazon (and its shareholders) certain gain by the program, and cost to the organization for the program is, I would think, relatively low: just incubating the basic memes until they take off, and then the meme-cluster takes care of the rest, including personnel selection (and self-selection by the personnel: the people who tend to join Amazon are, naturally enough, people who are attracted to the situation described).
At any rate, an interesting article, and one that makes one examine his values.
Also from the article:
“This is a company that strives to do really big, innovative, groundbreaking things, and those things aren’t easy,” said Susan Harker, Amazon’s top recruiter. “When you’re shooting for the moon, the nature of the work is really challenging. For some people it doesn’t work.”
Bo Olson was one of them. He lasted less than two years in a book marketing role and said that his enduring image was watching people weep in the office, a sight other workers described as well. “You walk out of a conference room and you’ll see a grown man covering his face,” he said. “Nearly every person I worked with, I saw cry at their desk.”
We need a modern Dickens, it sounds to me.
The lack of criminal convictions of those responsible for a corporation’s breaking the law is quite common—so common that it’s somewhat shocking when a corporation office does go to prison, as seems likely to happen for some corporate officials at Peanut Corporation of America. William Cohan in the Atlantic takes a look at why Wall Street bankers never faced prison:
On May 27, in her first major prosecutorial act as the new U.S. attorney general, Loretta Lynch unsealed a 47-count indictment against nine FIFAofficials and another five corporate executives. She was passionate about their wrongdoing. “The indictment alleges corruption that is rampant, systemic, and deep-rooted both abroad and here in the United States,” she said. “Today’s action makes clear that this Department of Justice intends to end any such corrupt practices, to root out misconduct, and to bring wrongdoers to justice.”
Lost in the hoopla surrounding the event was a depressing fact. Lynch and her predecessor, Eric Holder, appear to have turned the page on a more relevant vein of wrongdoing: the profligate and dishonest behavior of Wall Street bankers, traders, and executives in the years leading up to the 2008 financial crisis. How we arrived at a place where Wall Street misdeeds go virtually unpunished while soccer executives in Switzerland get arrested is murky at best. But the legal window for punishing Wall Street bankers for fraudulent actions that contributed to the 2008 crash has just about closed. It seems an apt time to ask: In the biggest picture, what justice has been achieved?
Since 2009, 49 financial institutions have paid various government entities and private plaintiffs nearly $190 billion in fines and settlements, according to an analysis by the investment bank Keefe, Bruyette & Woods. That may seem like a big number, but the money has come from shareholders, not individual bankers. (Settlements were levied on corporations, not specific employees, and paid out as corporate expenses—in some cases, tax-deductible ones.) In early 2014, just weeks after Jamie Dimon, the CEO of JPMorgan Chase, settled out of court with the Justice Department, the bank’s board of directors gave him a 74 percent raise, bringing his salary to $20 million.
The more meaningful number is how many Wall Street executives have gone to jail for playing a part in the crisis. That number is one. (Kareem Serageldin, a senior trader at Credit Suisse, is serving a 30-month sentence for inflating the value of mortgage bonds in his trading portfolio, allowing them to appear more valuable than they really were.) By way of contrast, following the savings-and-loan crisis of the 1980s, more than 1,000 bankers of all stripes were jailed for their transgressions.
At an event at the National Press Club last February, Holder said the virtual absence of convictions (or even prosecutions) this time around did not result from a want of trying. “These are the kinds of cases that people come to the Justice Department to make,” he said. “The inability to make them, at least to this point, has not been as a result of a lack of effort.” Preet Bharara, the U.S. attorney for the Southern District of New York, made a similar argument to me. The evidence, he said, does not show clear misconduct by individuals. It’s possible that Bharara is correct about that: Wall Street bankers make it their daily business to figure out ways to abide by the letter of the law while violating its spirit. And to be sure, much of the behavior that led to the crisis involved recklessness and poor judgment, not fraud. But even so, in light of various whistle-blower allegations—and the size of the settlements agreed to by the banks themselves—this explanation strains credulity. The Justice Department’s ethos regarding Wall Street, and the way the department went about its business, appear to be a large part of the story.
Any narrative of how we got to this point has to start with the so-called Holder Doctrine, a June 1999 memorandum written by the then–deputy attorney general warning of the dangers of prosecuting big banks—a variant of the “too big to fail” argument that has since become so familiar. Holder’s memo asserted that “collateral consequences” from prosecutions—including corporate instability or collapse—should be taken into account when deciding whether to prosecute a big financial institution. That sentiment was echoed as late as 2012 by Lanny Breuer, then the head of the Justice Department’s criminal division, who said in a speech at the New York City Bar Association that he felt it was his duty to consider the health of the company, the industry, and the markets in deciding whether or not to file charges.
In the aftermath of the crash, the Justice Department did not refrain from prosecutions altogether. In 2009, the U.S. attorney for the Eastern District of New York tried two Bear Stearns hedge-fund managers—Ralph Cioffi and Matthew Tannin—who had effectively run their $1.6 billion fund into the ground in the spring of 2007, an event that many believe was the canary in the coal mine of the financial crisis. But a jury acquitted the two men in November 2009. Added to the general fear that the economy was extraordinarily fragile, the unexpected acquittal seemed to put a deep freeze on Wall Street prosecutions for close to three years.
A serious national investigation of the practices of Wall Street’s pre-crash mortgage-banking activities did not begin in earnest until mid-2012—at least five years after the worst of the bad behavior had occurred—following President Obama’s call to action in the State of the Union address that January and the issuance of subpoenas to Wall Street’s biggest banks. The five-year statute of limitations for ordinary criminal fraud charges had passed while the Justice Department dithered, but civil prosecution of banks and individual bankers, which has a 10-year statute of limitations under a particular banking law, was still a possibility. Holder gave his various U.S. attorneys around the country responsibility for investigating.
A team led by Benjamin Wagner, the U.S. attorney for the Eastern District of California, investigated alleged wrongdoing at JPMorgan Chase, for instance. In many ways, Wagner’s investigation was typical of the Justice Department’s approach: hoover up hundreds of thousands of pages of e-mails and documents, interview current and former employees about their business practices, and use the findings as a cudgel to extract a financial settlement. Wagner and his team drafted—but did not file—a complaint against the firm in September 2013 that reportedly detailed how JPMorgan Chase itself (not merely Bear Stearns or Washington Mutual, two banks that it bought at the height of the crisis) knowingly packaged shoddy mortgages into securities that did not meet its credit standards and then sold them off to investors. As part of its investigation, Wagner’s team had deposed Alayne Fleischmann, a JPMorgan Chase banker turned whistle-blower, who’d told the team about what was going on. She had also detailed how, before the crash, her warnings about continuing to package up the bad mortgages into securities and sell them off as investments had gone unheeded by her superiors. After sharing her concerns with her boss in a 13-page letter, Fleischmann had been marginalized and then fired. (Disclosure: JPMorgan Chase also fired me, as a managing director, in 2004, and I am in litigation with the bank resulting from a soured investment I made in 1999.)
In November 2013, as part of a deal that kept Wagner’s complaint from becoming public—and the specifics of Fleischmann’s revelations from being widely disseminated—JPMorgan Chase agreed to a $13 billion settlement with various federal and state agencies, then the largest of its kind. Holder heralded the settlement as an important moment of accountability for Wall Street. But extracting large settlements paid with shareholders’ money is not the same as bringing alleged wrongdoers to justice. Instead of presenting a detailed picture of JPMorgan Chase’s misdeeds—as would have happened had Wagner’s complaint been filed and the matter adjudicated in court—the government and the bank negotiated an anodyne 11‑page “Statement of Facts” that glossed over many of the details of the behavior Fleischmann was trying to stop, and did not name any JPMorgan Chase bankers.The Justice Department reached agreements with other Wall Street banks, among them . . .
It perhaps is relevant that, prior to working for the Federal government, Eric Holder worked as a lawyer for Covington & Burling, a corporate law firm that serves Wall Street clients, and he has now returned to work for that firm. That does seem a possible conflict of interest overall, particularly if he tailored his decisions to ensure his return would be welcomed.