Political Argument: Is Labor vs. Capital important anymore?

Whoa? So the first post, I want to set the tone for the kind of stuff I lose sleep over. Please read to the end.

LAND, MONEY & LABOR

Political Philosophers have spent decades and centuries trying to sort out the battle between labor and capital, capitalism vs. socialism.

If you read through multiple sources, you may see a reference to the old feudal system. In fact, a large amount of ink is dedicated to addressing the change from an agricultural society to an industrial one. If we combine the “estates” from those two we get something like this:

  • Land – Old landed aristocracy
  • Capital – new merchant class
  • Labor – Old world craftsmen morphing into New industrial workers

What is the best way to balance those to organize this new industrial society? It turns out the question asked that way is wrong. The framing of the argument is off. They missed several things that anyone in your current HR department could give them a lesson in.

Here are at least three other things that are at least on par to determine internal and external motivations, and ultimate productivity and happiness.

  1. Ideas
  2. Vision + Will Power
  3. Organization

IDEAS = SOMETHING NEW

Certainly, there could be more, but I think those are pretty clear. I think of those; Ideas are the most clearly called out in current law and international agreements. It is also in what I have read, is completely ignored and is not counted as an “estate” in the new industrial society.

Patents, Copyrights, Trademarks and all other “intellectual property” are the main assets that are being wielded back and forth between nations. What is the big issue with manufacturing in China? Fakes and knockoffs. They may be the same lines, and the same end product even, but they are not paying the percentage to the “owner” of that “property.”

Closely related to that is brand value. Why did Lucas film sell to Disney for $4B? Why did Marvel Studios sell for a similar valuation? Only part of that is IP. I would imagine other firms had a similar number of characters, movies, toys, etc. There is something else. A trust and tradition that goes beyond the creator. An investment from the public in those symbols with specific durable meaning.

Isn’t that just property?

No.

The first argument is that it gets a unique name, Intellectual Property, which indicates that everyone knows it is something different from Property.

The second argument is that there are specific processes to claim and create Title for that type of property, and it does not have an indefinite lifetime like real property.

The third argument, If you look for it on a balance sheet all of the above items are typically not valued as property and instead are marked under the category of “intangible assets” for IP they build up internally & “Goodwill” in the accounting for the same items bought during an acquisition.

So it seems clear that ideas are on equal footing with capital, and can be assigned a value, but that the current system of capitalism cannot describe any better than “stuff.”

VISION + WILL POWER:  That can’t be a real peer of the others

What does Vision + Will Power represent? Can that be something separate?

Think about it this way. What is the difference between Tesla and General Motors?

Do they both have Property and Capital? Yes, of course. GM has dozens and dozens of plants.

Do they both have Labor? Yes and robots too. (random odd thought: robots are both property and labor)

Do they both have a lot of IP and specialized knowledge? 100%. Even in the same areas of EV, Batteries, Automation, and so forth.

On paper, looking at all of the traditional “estates” in society, they are at best equal. In most analyses, GM would have more and better of everything. There are some clear brand value and “meaning difference” between the two. Tesla means something very specific and has more of a “halo” than GM.

BUT, even accounting for the better “brand” the market does not value them the same. And likely you do not as well. There have to be other things that are driving that.

There are two reasons I can see, and I will talk about Vision + Will Power first.

Thought exercise, if Elon Musk passed away tomorrow, what would happen to the stock market valuation for Tesla? Collapse immediately, right? What about the future of the company and all the employees on ten years? would it still be a thing? Probably not.

So what does that leader provide that all the Plant, Property and Equipment does not? What does Elon inject that none of the other workers, managers do? What does he create that the IP and Brand do not capture?

What you are thinking of would be what I am calling Vision + Will Power. It is the animating spirit of the corporate body. It is the desire, and the want and the drive that radiates outward. It is the first crystal that all the others organize around.

Based on our thought exercise, the hive mind of the market clearly knows that there is something of value when you have a driven visionary leader like Musk, or Bill Gates, Steve Jobs, Mark Zuckerberg, etc. And that value is baked into the price of the stocks, but it IS not captured directly anywhere on a balance sheet or income statement.

ORGANIZATION: AREN’T THERE OTHER LEADERS WITH VISION?

True, and what makes any particular vision come to life cannot rest in one person. The organization around them has to take that vision and bring it to life. And there is a large number of other assets and knowledge around how to do that. And that by definition has to sit between and organize the labor and the resources. And I would suggest that there are several other subsystems within a health efficient and winning organization that are all working well.

The connective tissue between ideas and resources and labor is the organization. And organizational excellence, or in Ram Charan’s words “Execution” is that ability.

How important could “organizers” be?

Some organizations are 6-foot tall cross fitters that run spartan beasts regularly. Some organizations are sick and injured with polluted lungs from smoking. Is the qualitative difference between organizations is a reflection of the skill and labor? Or is it a result of accident and history? Or it is the result of contemplated design and precise tuning and training?

It is easy to become cynical about “corporate reorgs” because 80% of the people doing it are not fully skillful, or have other goals that organizational fitness (like cutting costs or making a round of layoffs work)

Is that really a class or estate: “people that organize”?

Sure, if people who know how to farm are an estate or people that do manual labor are an estate, then people who build and tune organizations are an estate.

And of course there are subsets, but I think it all rolls up pretty well.

  • Supply chain management
  • People management
  • Talent and training
  • Manufacturing

And many more. But as much as machinists and electricians are “labor”, all of the above can be “organizers”.

What Else Could Corporate Science Contribute?

I don’t think that is the end of what political philosophy could import from the current state of the art organizational design theory and practice.

  • The Creative Class – Ideas, Patents, and Trademarks must come from somewhere, it is from the ideas of these people.
  • The Leadership Class – White collar management, people who understand organizational design and human behavior. The design systems and rewards that drive desired outcomes.
  • The Execution Class – Possession of the ability to hit commitments. They animate the organization. Sort of Randian Supermen.
  • The Efficiency Class – Waste cutting, culling optimizers of the system. My personal favorite principle
  • The Network Class – Cooperation and marketing, they are the particles that shuttle goodwill back and forth.
  • The Steward Class – Brand guardians and ensurers of the standards. The create Stability – In the sense of a stabilized network, and Value.

I won’t try to pull all that into this post, but I can see several other distinctions that could be important. And for the purpose of the next section, each could have their own goals and values, and culture they can best thrive.

PULLING IT TOGETHER

Labor and capital

So what does all of this look like? As opposed to a tug of war between Labor and Capital, I see this working something more like this.

new model

The model is more complex, but I think much more accurate of the forces that are at play in our civil and political society. It begins to look like an organism itself. With certain parts playing unique and complementary, not competing roles.

BURYING THE LEAD

This post could easily be a whole book, but I don’t have the time this morning to write that. But let me attempt to highlight the implications.

So what does that mean for Capitalism? Well, I think when analyzed this way, it is clear that the critiques of capitalism as co-opting socialism, for example, falls flat.

Let’s start by shifting the starting point. Let’s assume we are not in a fully capitalist society, and that era ended with the introduction of Labor Unions, Trust Busting, and Social Security. That led to some awkward attempts to define what exactly it was. Democratic Socialism? Republicanism with some socialist features?

Let’s make this easier and give where we are today a new name.

Let’s call a system organized around all participants “Proportionalism” and let’s define the features of such a system as follows:

  1. Proportionalism is pragmatic and flexible
  2. Proportionalism is rational and nonmystical
  3. Proportionalism balances the needs of all participant groups.
  4. Proportionalism creates differentiated external motivations.
  5. Proportionalism can be modified and extended
  6. Proportionalism learns and is adaptive

Proportionalism I think is a made up word concerning governance theory. But it is neither democratic or republican, it is neither socialist or capitalist, but it does adapt and mediate.

If we assume that is our current starting point and look for proof that we are living in such a system, I think the evidence is clearly there. I think it also accounts for the variation in Europe and the US much better than “advanced capitalism” or “democratic socialism”

How can a system be Socialist and Capitalist at the same time?

Let’s assume that the purpose of political and social philosophy is to organize a group of people in a way that optimizes one or more outcomes. And let us further say that corporations can be in essence miniature test beds for such theories.

Now let’s ask can a company be socialistic and capitalistic at the same time?

If we assume that the modern corporation is Proportionalistic, we can see that it embraces all options and that it DOES have aspects of both socialism and capitalism.

For example, consider pay.

Does your company have Sales people on a commission based variable pay system? That sounds capitalistic and merchantilistic. Does your company have your leadership compensated with stock options and ownership? That seems almost feudal in nature. Does it have a labor force compensated by hourly wages? Doesn’t standardized roles and guaranteed specific salary sound socialist?

Do those all sound like the same thing? Of course not. Some sound like very capitalistic external motivations, some sound very socialistic. But yet no one thinks of them as being contradictory or incompatible.

In the modern Proportionalistic corporation the designers of the organizations feel free to pick from any form of compensation and motivation that works best. If a classless system with everyone getting the same pay is best for the manufacturing plant, they can choose that without constraints. If they want to have differentiated results based on output and competition from the sales force, they can choose that system. AND they can make different choices for different representative populations, and even individually differentiated choices between models.

I will try to flesh out some of this in future posts, would love to hear some feedback over on my twitter, and if you liked this, please click one of the share buttons.

 

 

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