Diverse business models for the transition

gg3 · Posted: Thu Jun 17, 2004 2:38 am Post subject:

I've been wanting to reply to some of the points in this topic for a couple of days, but I'm currently working on a design case for a client who wants an 80-station PBX that will support telecommuters. I'll be back tomorrow night to post something more interesting than a "be back later" message:-).

Onyered · Posted: Thu Jun 17, 2004 3:17 am Post subject:

[quote="Whitecrab
Except by waiting he leaves himself with an inferior (worse-tasting) product, and less of a window to use it himself. People will pay for freshness/quality.[/quote]

You miss the point. The money can wait and not buy at all. The money will not go bad, it will draw interest. Maybe you should read the article for a better insight than the example I gave.

rowante · Posted: Sun Jun 20, 2004 10:24 pm Post subject:

gg3, what sort of government or political system do you imagine pioneering your ideas? Are you talking revolution or adaptation?
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gg3 · Posted: Mon Jun 21, 2004 5:23 am Post subject:

tkn, where are you geographically?, perhaps we can get together by phone or in person and talk about this more. In the meantime...

tkn, what you're talking about is generally known as "democratic enterprise." DEs can be organized under any type of legal entity that permits multi-person ownership (e.g. LLCs, coops, corporations). Their sucesss rate is comparable to that of other enterprises starting with equivalent capital resources and market conditions. Or to put it differently, they fail as often as regular startups, but since they are using a different business model, their failures are used as an ideological point by those who are opposed to the idea.

The most important considerations when starting a DE, and in fact they're absolutely necessary in order to succeed, are for the prospective members to a) be thoroughly educated in the principles and practices of management and corporate governance practices, b) be committed to an ownership mentality rather than an employee mentality, and c) be educated additionally with regard to the unique characteristics of DEs, i.e. participatory decision making or governance by election of management.

The idea that you can just be a regular worker-bee and fulfill a certain number of hours per day, is out. You have to think in terms of task-completion. If your task requires that you stay late or come in early, you do it, and you don't get extra hourly wages or direct salary benefits for doing so (you might get added "overhead hours" toward your yearly or quarterly profit distribution, which is a nice incentive).

Also, democratic management cannot be allowed to become a forum via which people act-out their unresolved issues with authority. First and foremost it's about being in business and earning the daily bread. So you can elect your managers, but then you have to respect their authority to the same degree as if they were your commanding officers in the military. And if you don't like the way they manage, you can fix it at the next annual meeting.

And/or you can have "functional authority" that operates according to expertise. Let's say you've got a constuction company that runs as a DE. Each member has expertise in one of the building trades or sub-fields. When the crew is pouring a foundation, the person with the greatest expertise in concrete work has authority and runs the crew. When the crew is framing the house, the person with the greatest expertise in carpentry has authority and runs the crew. Etc. So each person occasionally has superordinate authority, and more often is in a subordinate position.

One of the thorniest issues is compensation of "staff," by which I mean, the distinction between "line" (direct production, as in carpenters building houses) and "staff" (support activities such as administration). The relationship between line employees & line-management, and actual income for the company, is direct. The relationship between the activities of staff employees and staff-management, is much less direct and harder to quantify.

I could go on for ten or fifteen pages on this subject, having done some consulting work in the field and also operating within this context.

Also keep in mind that the DE model is an ownership & management model for specific individual companies; it does not claim to address the issue of how to design an economy at the macro level. The main issue I'm concerned with here is to develop a range of different business models and fit them to various sectors of the economy in a rational manner that preserves individual equity, provides personal incentives for work and innovation, and is long-term sustainable in a manner that is compatible with the values of a civilized society.

Missing Link:

Yes, design a system that will enable the world to live within its means. Consider that the current economic system resembles two very obvious disease processes. One is the "business cycle" of boom and bust, which closely resembles bipolar disorder or perhaps bulemia. The other is the "growth paradigm" which closely resembles the behavior of a tumor. The system is clearly not self-regulating in a homeostatic manner (by which I don't mean "regulation" in the sense of "government regulation of the economy," which has its own problems). It lacks sufficent short-term feedback loops, particularly in regard to effective negative feedback that will limit excesses at both the individual scale, the microeconomic scale, and the macroeconomic scale. So our task is to design something that solves for these issues.

Onyered:

I certainly get your point about money. Now here is something very interesting. What could be done to cause money to be subject to "spoilage," same as any other physical object, so it can't be used in the invidious manner you describe?

Well, in economic terms, spoilage means that the value of something is clearly decreasing over time. Okay, so what causes the value of money to decrease over time...?

Yep: Inflation! Now for those of you whose gut reaction to that word is similar to your gut reaction to a picture of Osama, think about this for a moment. Inflationary times benefit those who operate on cashflow: who earn their paycheck and spend it on goods and services; or who run small businesses that do things such as invest their cashflow into tools and other physical capital resources that enable labor to produce more income. Inflationary times are specifically bad for the Big Guys who are holding lots of cash but little else.

Now you can start to see why the present dogma in government and business is that inflation is a bigger taboo than kiddie porn! Inflation is good for the little guy, bad for the big guy. Up to a point. Beyond that point, it's bad for everyone because it prevents people from carrying on their normal lives and the whole system breaks down.

Right now Greenspan in the US is doing a darn good job of holding inflation down. Has it occurred to you that government could do an equally capable job of managing the economy in such a manner as to be good for the Little Guy, or good for sustainability, or good for some other measurable dimension of value...? And do it without destroying the premise of free enterprise and a viable level of personal incentive...?

Rowante:

What sort of government? Personally I have to hope that it can be done within some kind of parliamentary or republican form of representative democracy. An enlightened monarchy could do it by fiat, but that's vaguely like cheating:-). And seriously, we have to practice what we preach.

Re. "revolution," the choice isn't between ballots and bullets. The choice is between fighting and building.

We can try to get there by first fighting those who are holding all manner of corrupt and unethical power, and then building something new afterward. But as long as we're a free society, we don't have to do that: we can go directly to the stage where we're building something better. And if it really is better, it will over time gain enough participants and supporters to become a true competitor against the status-quo.

By analogy think of the Internet: it's designed to route communications around areas of damage. Back in the days when all this was new, we used to say "censorship is a form of damage," meaning that the Internet was, by virtue of its design, capable of providing free exchange of ideas despite anyone's attempts to censor it. This ideal has largely come true. And the point of the analogy is, we can route our new sustainable economics around the damage caused by the present corrupt & unsustainable economics.

The fact is that Ma Nature is going to do it for us whether we like it or not. This is going to be a century when unlimited growth hits its limits, when resources start to go into shortage, and when ecological externalities come home to roost. The question for us is what we want to do about it, which is to say, whether we prefer to be guided by our aspirations or merely by the avoidance of pain.

More later, this post is already too long:-)

tkn317071 · Heavy Crude Joined: May 29, 2004 Posts: 106