Friday, July 22, 2016

Needing Problems

'The Luddites were 19th-century English textile workers (or self-employed weavers who feared the end of their trade) who protested against newly developed labour-economising technologies, primarily between 1811 and 1816. The stocking frames, spinning frames and power looms introduced during the Industrial Revolution threatened to replace them with less-skilled, low-wage labourers, leaving them without work. The Luddite movement culminated in a region-wide rebellion in Northwestern England that required a massive deployment of military force to suppress.'

The lesson I have learnt from some of the smartest business people I know is that ownership matters. The nature of work in a company with owners and workers is that the workers get a salary, and the owners get what is left. If you are paid a salary, you get a commitment from the owner to a degree of stability. Largely independent of the fortunes of the company, as long as it survives, you will get your salary. In new companies, the owners will be sweating over meeting the wage bill. They may not receive anything for a while in order to pay for workers.

If a company is small enough, the owners probably know the workers. The owners probably are workers. As they grow, things become more abstract. Workers become an input into the process. Salary doesn't depend on the success of the company. It depends on cog value. Your manager will be doing some figuring in their head to pay you enough that you won't leave. That figure will depend more on what alternatives you have than how much the company could afford to pay you. 

This is because there is no 'right price'. Capitalism doesn't solve the question of what the right price is. What it does is trade. If you stay in your job, you are saying that you are being remunerated enough to stay. The manager will also be comparing what they get from you to what they can get from alternative hires. These hires may be in other countries or they may be machines. If a machine can do your job for less, or someone in another country will do it for less, there is a big incentive to go in that direction. 

Capitalism is effectively a massive incentive to solve problems. I have had bosses tell me to 'make yourself redundant, so you can move onto more interesting problems'. I loved that advice. If you can take a job that used to need doing and solve the problem so that it no longer needs doing, you can really see the value you have added. The problem with that is obvious. If you are not the owner, you are really trusting that there will be another job for you.

The Luddites spotted the Industrial Revolution and the coming of the machines as destroying their jobs. They were right. Their jobs were being made redundant. The big bet was that there would be other jobs to replace those jobs. The problem there, again, lies in trust.

You can turn your labour into food, housing, clothing and security. You can also turn your labour into capital. In both cases you can be solving problems. The advantage of slowly turning your labour into capital is that once that problem is solved, you aren't left with the problem of survival. Your capital still has a jobYou aren't left with a situation where you actually needed the problem.

Living hand to mouth and not saving puts you at incredible risk in an economy that is evolving at pace. Retirement used to be about saving for the day when you couldn't work. When things change at the pace they do now, saving and more importantly investing becomes a case of ensuring you aren't left in the lurch when work changes. You can't assume your job will still be a job that needs doing.

I believe in a Universal Basic Income. Effectively, this is a dividend on the conversion of the labour of our shared ancestors into capital. We have two parents, four grand-parents, eight great grand-parents, and so on. You don't have to go to far back before you realise we are all family. 30 generations back, we had a billion ancestors in the same generation. There weren't a billion people on the planet at that time.

I don't think most people are going to save. The figures I used to know in South Africa were that around 1% of people could afford to retire at their same standard of living. About 6% of people could afford to retire at all. A UBI allows a buffer for change. It allows people to retrain, to study, or to spend their time on pursuits which don't generate money. 

Change is scary if change means you are stuffed. A little breathing space benefits everyone and stops us needing problems.
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