OMB: Owner-Managed Business

This is quite a surprise, but I guess it shouldn't be. His "Excellence" series wasn't about doing exactly what everyone else is doing, nor about conforming to the practices of the rest of your industry. Since people are the most important part of any organization, it behooves management to focus on developing great people and rewarding them for their contributions to the company's success and the prosperity of its shareholders. (This is yet another reason why executives should not be overpaid--it gives them the illusion that their minimal contributions outweigh those of the actual productives who make the company its money--nor should lower-level workers be underpaid, because it says that their contributions are not valuable.)

Now, most small, locally-owned businesses (SLOBs) do not have professional management, and it is up to the owner or manager to decide these issues on his or her own. Since SLOBs tend to have less of a capital cushion than their large, out-of-area corporations (LOOAC). The lack of formal management might even be a benefit here. Chances are, the owner or manager doesn't have a pre-printed evaluation form to use when rating employee performance. He (or she) has to rely upon his impressions, observations, and on his impression of what things are most important. Personally, I hate "squishy" rating systems. I'd much rather know what is expected of me. But the truth is, even in larger organizations, there are enough politics going on that your evaluation doesn't really reflect the specific criteria listed on the sheet. Instead, it reflects how well you succeeded at making your boss (and his / her boss) look good to higher bosses.

Like it or not, there are some fundamental changes going on in the workplace. These changes have been going on behind the scenes for a decade or more, but the very deep recession accelerated the transformation process. Already, there is little need for thousands of identically-trained high school graduates each year. College graduates are somewhat differentiated by their majors, but still suffer from the presumed equivalence of a B.A. program from one college to a B.A. program from another college. It is our differences that matter most in acquiring jobs--if you don't stand out, there are too many people just like you applying for the same job--assuming, of course, that you meet whatever the entry requirements are for that position.

Indeed, this is one of my chief criticisms of our K through 12 educational system right now. Our schools serve as education factories. Their product is "entry-level workers". As long as there was a more or less monolithic industrial base to consume said product, their output was acceptable. Beginning in the 1960s, the garment and textile industries slowly moved overseas. In the 1970s, the oil embargoes began, with each one producing an economic shock that closed more factories. During Jimmy Carter's presidency, we even had gas lines, which was the beginning of the end for the North American auto industry.

As industry after industry found that it no longer needed identically-trained factory workers (because the factory wasn't located in this country), schools redoubled their efforts to produce a higher-quality of identically-trained factory worker. State governments joined the process, seeking to use their powers to fund and to regulate schools to help them improve the quality of their product (which is still identically-trained factory workers). The federal government, too, is involved, and getting more involved every election. There was "no child left behind" under George W. Bush, and now we have Barack Obama pushing even more federal involvement in the school system. Such efforts are doomed to fail.

The problem isn't limited to the quality of the product, although there are some serious issues there. The real problem is that the product is no longer needed, and no one has any idea what to replace it with. There isn't a need for identically-trained factory workers, so the content that we are trying to teach isn't relevant to the students or their parents, which drags down performance.

The thing is, there isn't one single answer for our schools. The students of today are going to graduate into a world where traditional join-a-company-and-put-in-your-time jobs will continue to be scarce for some time to come. In some urban communities and among certain ethnic and age groups, the unemployment rate has been in double digits for many years. This will continue, only it will no longer be only Black teens and young adults that cannot obtain employment. This will affect every ethnic group, at both the younger and older parts of the age spectrum.

I don't see us preparing to deal with it. The schools need to be freed from overly hierarchical administrative structures, broken out of overly large "districts" and given over to hyper-local control. Hyper-local control means that the authority traditionally exercised by the board of education should be partially dispersed to parent councils at each school. Schools, however, should no longer be thought of as individual campuses, but as communities of learners who may spend part of the day at one or more campuses. Instead of a large clump of blandness, schools need to have emphases--math & science, literary & language arts, performing arts, fine arts, health & medical, mechanics, technology, media, and so on--and early on, students should select one or more emphases to pursue together with a common "core" subject matter outside their areas of emphasis.

The traditional one-teacher-lectures-thirty-students classroom is also past its expiration date. Most students' interests and needs are dissimilar enough that a fifteen student classroom is already pushing the limit of students' ability to derive the most benefit from instruction. Schooling is going to become more expensive, but part of that will be because we'll need a lot more teachers to implement the necessary changes. We'll also benefit from eliminating some of the administrative positions that soak up so much of the schools' budgets.

Even as the pundits proclaim an end to the recession, jobs continue to be a problem. "Yes, but they are a lagging indicator," you'll hear them say, "look at GDP instead." GDP, unfortunately, isn't really the best measure. A measure of the economy should capture the impact on the "average joe". Yet, according to the article, GDP has risen for two consecutive quarters.

Have you seen it? No? Neither have I, and neither have any of the people I talk with. GDP growth may be happening, but it is a Mardi Gras mask, hiding a hideous and deformed face behind a comic smile.

What I find surprising is that the article nowhere alludes to the drastic change in the nature of the industries still existing in our nation, which equals an equally drastic change in the number and types of jobs that may become available over the next several years. We have literally shipped the bulk of our manufacturing overseas, along with technical support, billing, and other usage of "call centers". We are very nearly at the point where we'll all work at that big blue discount store, selling each other imported goods made with slave labor. (I'm reminded of a scene in Demolition Man, where Sylvester Stallone's character learns that "all restaurants are Taco Bell.")

The people who worked at Chrysler? The ones who've lost their jobs will never regain them. The ones still working are likely to lose their jobs in the next year or two. General Motors? Not quite as bad, but not much prospect of returning to the go-go years of a Cadillac Escalade and a Chevrolet Suburban in every driveway, either.

A decade ago, we thought "tech jobs" would save us. But that doesn't seem to be the case. Semiconductors were gone even then, computer hardware followed suit. Software jobs? Moving overseas with surprising alacrity, after first importing underpaid foreigners to this country in order to reduce industry pay levels.

Finance jobs? Many of them remain, but increasingly, they report to overseas bosses and owners. It is only a matter of time before everyone except the paid-on-commission sales agent will be overseas.

In every case, it was poor management and cost-cutting strategies that lost the jobs. American management is simply awful. I often wonder why our management hasn't yet bankrupted every single business, putting unemployment levels near 100%. They are that clueless.

The solution, as I see it, is to get back to smaller, locally-owned businesses (SLOBs), who sell locally-produced products and services and provide local jobs. Instead of buying products that were shipped 5,000 miles, we need to be buying products that come from within 100 miles of our doorsteps. We need to be pressuring our state and local governments to stop trying to entice large, out-of-area corporations (LOOACs) to open a local branch, and to provide part-time, low-wage jobs, and to allocate those resources to building and growing SLOBs that will provide local jobs (hopefully better paying jobs than the LOOACs).

The article says that an estimated $1 trillion dollars in unfunded state pension liabilities will have to be made up through some sure-to-be unpopular actions. It also says that local governments were not included in this study, but it is thought that they have a similar shortfall to cover. Also, Y!News articles don't stay up very long. In about ten days, you may not be able to find it again.

Are there similar unfunded liabilities in the federal government? Yes, there are. For one, Social Security is unfunded. Sure, there is a so-called fund for Social Security benefits. But that fund consists of federal bonds--IOUs--which are promises to pay back funds out of then-current tax revenues. In the case of borrowing from Social Security, this is done without openly admitting that the funds are being borrowed for current spending. It looks like we'll be in repayment mode later this year (2010) or early next year, so expect to see sudden growth in the federal deficit.

So how do we fix this? Well it didn't happen overnight, and a solution won't either. We got into this situation because it is politically popular to have benefit programs and military endeavors, but politically unpopular to raise people's taxes in order to pay for them. We'll either have to cut way back on the programs and endeavors, or we'll have to raise taxes sharply.

There is a third option: make a foolish move. What kind of foolish move? Well, one way would be to turn on the printing presses and inflate the currency rapidly, so that repaying these liabilities (in then-current dollars) would not be so expensive. This, of course, would scare foreign investors, including China. They would watch the value of their assets (dollars held as a result of American imports of their products and bonds held as a result of their funding our government's overspending) plummet, and they wouldn't be too happy about it. Another way is to default on some or all of the obligations. This may be inevitable, given the size of the deficit in proportion to National Income (NI), as measured by GDP. But that would mean that many exporting nations would refuse to do business with us, and many others would only use a cash-only basis. If the size of the shock to a foreign economy is large enough, it could even cause a war.

This, by the way, is more of the econolypse showing through. The econolypse, for those who haven't been paying attention, isn't just the present economic meltdown. The econolypse is the revealing of what has been going on behind the scenes in the economy. The negative effects we're experiencing are just symptoms of a deep and systematic disease. And unfortunately, both the present administration and the former have failed to deal with the roots of the sitatuation--instead, they have sought to bring back the veneer of prosperity which existed a few years ago (but which concealed a rotten carcass). States, particularly California, failed to set aside adequate reserves during the go-go years, when anyone with a pulse was offered a home loan, real estate prices were growing rapidly, and consumers borrowed on their homes in order to spend-spend-spend. Further, states looked at the situation and thought it would be permanent, so they based their financial futures on ever-increasing tax revenues. When the house of cards began to collapse, their dreams of always-upward revenues were broken. Now, we are left with figuring out how to pay benefits we promised to people who have already done the work for which the benefit was earned.

Personally, I'd like to see us raise and dramatically simplify taxes¹, as well as sharply curtail government spending. There is always some group that benefits from an agency's existence, so it isn't easy to close them. But we'll have to close and consolidate some agencies, stop performing some functions, and tell a lot of people who had safe and secure jobs that they no longer have them. It will take years of stick-to-it persistence.

¹ I favor absolutely no deductions or credits of any kind, for anyone, with two or three brackes: For those who earn under $20,000 per year (index these bracket amounts to inflation), zero tax. For those who earn $20,000 to $250,000 per year, 25% of each dollar above $19,999 should go to federal taxes. For those who earn over $250,000, I could support a third bracket at 35% of every dollar over $250,000. For corporations, I favor taking pay for managers and executives out of post-tax income (meaning no deduction for the corporation, so no subsidies from taxpayers for the company's management). I also favor taking debt repayment (bonds, notes, et cetera) out of post-tax income, because it isn't right for the rest of us taxpayers to subsidize corporations' unsound capital structures.

This is an interesting admission. Some of the jobs lost are not your usual business-cycle hire-too-many then layoff-too-many jobs. Some jobs that would be part of the economy's stable bedrock that are gone for good.

I still question the idea of most job losses during this econolypse being cyclical. There were a lot of jobs tied to the financial services / real estate bubble that will stay gone until the next time a bubble hits those fields. Those jobs, then, aren't cyclical; they are symptomatic. The auto industry is very cyclical, but most of the job losses there are probably permanent. With Chrysler's likely failure later in 2010 or early in 2011, even more of these losses are likely. Technical support (call center) jobs were already moving offshore, as were programming jobs. Airlines have been merging and cutting jobs since 2001, at least. Other manufacturing jobs lost were also mostly just exported overseas, and therefore, are not coming back.

I see a few construction / real estate jobs and some freight jobs (trucking, warehousing, railroads, port workers) as being the primary cyclical jobs that will return. Also, some of the higher-priced retailers and restaurants will recover and start hiring again. Other than that, I'd guess that nearly all the jobs lost in this recession are gone for good.

As far as economic recovery goes, I would not expect even their 3% forecast to come true this year, simply because seventy percent of the economy consists of consumer purchasing, and a good twenty percent or more of consumers are under severe financial stress. Without higher sales, retailers won't hire more workers and won't buy more merchandise. Without more merchandise coming into stores, wholesalers won't hire more workers and won't buy more merchandise and trucking companies won't buy more trucks or hire more workers to work in their warehouses or drive their trucks. Without more merchandise heading for wholesalers, manufacturers won't hire more people to work on the assembly lines, and there will be fewer people employed in railroads and in shipping ports.

This situation really seems more similar to the 1930s than anyone wishes to admit. There was a period in the 1930s when unemployment wouldn't go below 24%, no matter what they did. According to ShadowStats, unemployment is over 20% now, or if you use the government's U6 number, it is around 16% recently, 21% in California. You do have to be aware that the numbers used back then are not strictly comparable to today's values, however. What we have today is more like the beginning (that is, 1930) of what they had back then.

My point, however, is that these economists are belatedly starting to realize that something else is going on. First they were late to recognize the impending recession. Then, they were late to recognize the recession's onset. Next, they are still quibbling over the causes of this particular recession (and yes, I believe it is more than just the business cycle, although the cycle is a part of it). Finally, they are late to recognize that some of the job losses are forever. And they are still clinging to the fantasy that recovery is coming this year.

If 70% of GDP consists of consumer spending, and sixteen percent of consumers are unemployed or underemployed, it isn't likely that this part of the economy is going to grow very much until jobs recover. And yet, businesses won't hire people to produce goods and services that they cannot sell, so consumer spending is very much the tail that wags the dog.

Now to lay out a way for the desired economic recovery to take place:

We start with restoring justice. Many of our financial companies, like other corporations, are amoral. The only way to corral them into performing their duties in a moral and ethical manner is to arrest and imprison executives and to claw-back ill-gotten gains.

• First, any consumer debt that is more than a year past due, we cancel immediately, with the exception of federally-guaranteed student loans. The chances of collecting those debts are small, anyway. This takes some pressure off of consumers. It will also force some of the most unscrupulous lenders out of business.


• Secondly, we cap consumer interest rates at fifteen percent, with a state's lower rate cap taking precedence. We require that federally-chartered financial institutions comply with the state consumer-protection laws where the affected consumer lives.


• Third, we stop turning a blind eye to corporations that abuse consumers or their employees. A few SWAT-style raids on corporate headquarters buildings, followed by marching CEOs in leg irons and orange jumpsuits before TV cameras, and prosecutors asking for asset forfeitures and the noose--you'd be surprised how many companies will suddenly change their behavior. This is the most important part. In order to succeed at respawning economic growth, we need to arrest and charge hundreds of CEOs, managers, officers, and directors.


• Fourth, have the AG issue an opinion letter that consumers' information is the proprietary property of those consumers and may not be sold or otherwise disclosed without their prior written consent, nor sent across national borders with or without consent. Have federal prosecutors "saber rattle" about charging companies that have consumer data going to divisions or contractors that are outside of US jurisdiction, and then watch all the call centers and credit processing centers suddenly moving back into this country.


• Fifth, cancel all federal subsidies to large corporations. Then take those whose workforce (inclusive of outsourced labor) is predominantly overseas and extract "workforce impact fees" to offset the salary, benefits, and taxes that are not being paid because of overseas work. Announce (and carry out) stepped up arrests and prosecutions of managers in firms that knowingly hire illegal aliens (including those who should know, but choose not to).


• Sixth, we declare certain industries vital to our defense, including semiconductors, computers, software, and other high-tech fields. Because of this, we then mandate that a certain percentage of the US market (that is, sales of that product or service) must consist of companies which are at least 50% domestic-owned, whose products are made in domestic factories, using domestic labor and parts. You'll say, "That sounds like protectionism. You're not conservative!" To which I say, I'm not pro-corporation, if that's what you mean. I'm pro-small business, because that is good for the American people, and I am pro-American people. Protecting the future of America's people may require some restrictions on imports, which is what China, Japan, Taiwan, Korea, and nearly every other country on earth does. I don't want to stifle improvement or competition, thus I don't want to push imports out of the market.


• Seventh, and lastly, restructure the laws, so that Stalinist-structured, top-down, you-work-for-peanuts-so-the-CEO-can-have-a-bonus management costs company shareholders a percentage of profits (on top of other taxes, and not offset-able) which must be reported in bold print on the first page of the annual report and the 10-K.

The story of the 1800s and early 1900s was that a few, generally-unscrupulous people were able to get control of most of the wealth and resources of our nation. The story of the mid-to-late 1900s was mostly how we moved to block the unfair and anti-competitive actions of those wealthy few. Now, we are faced with having to rein in the behavior, not of the wealthy, but of the high-income managers who now run the companies. If we allow them to do so, they would send the last job overseas, then when we couldn't buy their products and services, they would move themselves and their companies out of the country and watch the collapse from afar.

(No, wealth and income are not the same thing. Wealth is how much more you own than you owe. Income is how much is coming in every year.)

This is frightening. Despite the fourth amendment's guarantee of privacy against unreasonable searches, the government is seeking to gain warrantless access to people's historical locations. Imagine that you are downtown and you see some robbers enter a mini-mart. Wisely, you flee, and you decide that you don't want to testify, so you don't come forward.

The government pulls the mobile phone records, sees that you were very close to that place at that time, now, they may decide you are a potential suspect, or they may decide that you're a witness. Either way, without having any specific basis, they'd be pulling records of phones from the local towers. Now you have to tell them what you saw, and hope you can escape without testifying.

Please be aware that I am not approving anyone's testify / do not testify decision. I am saying that without privacy, they'll know who was there, whether or not they testify.

As the judge himself asked, what if you attend a protest march? Should they be allowed to use your mobile carrier as a surveillance tool? I certainly hope the court rules in favor of privacy and against expansive government intrusion.

Your girlfriend spends the night while your wife is visiting her sister. I'm not saying I approve of it, but why should the police know about it?

I have been a continual critic of our educational system since I was in school during the 1970s. When I graduated, we were still being told that having a high school diploma would guarantee us a good job. But I quickly discovered that it was about as valuable as used toilet paper. Where I lived, there were few factories, and over time, that number became even smaller. My community was considered the low-income area. We were the laborers, not the management; we were hired to do physical work, not conceptual "mind" work. One person I knew was a fast-riser, because he got hired into a unionized supermarket and made much more than most of us earned.

The key thing to remember is that our education system was designed to prepare most of us for factory jobs. We had nearly-identical classes, with nearly-identical content, operating under very similar schedules. Whether you graduated from Sierra Vista High School in Baldwin Park, Northview High School in Covina, or Workman High School in La Puente, graduation was supposed to mean that you had a particular set of knowledge and training. You were swapable with any other high school graduate. Now, there was some attention paid to someone's grade-point average and class ranking, but those were not really relevant to most employers' environments.

Now, college was held out as a way to move up within corporate America. If you wanted a job with the biggest companies, but not on the factory floor, you were told you should go to college. If you wanted to try and work your way up to company president (the term CEO had not yet reached most Americans' consciousness), you had to be college educated. So, after spending a few years in a part-time service job, I went to college. The thing they sold to us was job-relevant training, but the thing they provided was a lot of general education coursework that seemed to be a waste of time. Unsurprisingly, I dropped out after a year.

It took another five years or so for me to return to college. This time, I was hungry, motivated, and driven. All the "steer manure" in the world couldn't prevent me from achieving my goals. Over time, I finished college, earned a master's degree, and wound up working for a government agency, making more than three times my previous hourly rate.

Along the way, I discovered the deep inner secret of collegiate education: college was never designed to give people job training. It was designed to train the upper classes to think critically and independently, so that they would be able to come to the best decisions on how to run things. The reason that college was so valuable in corporations is because most employees were nothing more than drones, so an independent thinker could become highly valued, even as he (corporate management structures were designed almost exclusively for white males) broke the well-nigh Stalinist conformity that corporations demand.

Thirty years after high school, I'm hearing the same advice being given to youth of today. The advice was bad then, and it is bad now. The truth is, a high school dropout who is entrepreneurial, gregarious, and has some sort of skill has a better chance of earning a high income than a high school graduate, whether that skill is artistic, mechanical, mathematical / statistical, or certain currently-demanded computer-based skills such as CAD, computer animation, or some types of programming. Such a person can out-earn a college graduate for the medium term (five to ten years, until that in-demand skill is less demanded), without having the high debt load that college places on students. This was true in the late 1970s, it was true in the 1980s, and it is true today.

The key is, we have to get students to build differentiating skills. We know that a diploma means nothing, and a degree means little more, in terms of opening up job opportunities. When your step-grandson shows an interest in playing the violin, you have to convince his parents stop forcing him to jelly his brain on useless homework, so that he has time to practice and to continue building his skills on that instrument. When the parents tell you that homework should come first, tell them that you've learned from the mistakes you made raising them, and you are trying to prevent them from making the same mistakes with your grandchildren.

You see, the economy is undergoing a tremendous restructuring, even as it goes through the econolypse. The corporation as job-giver is going away. The factory job is being shipped to foreign nations, where workers earn very little. The process was already going on in the 1970s, but the oil crisis accelerated it. Suddenly, Detroit auto makers lost market share every year. In a quest to lighten their cars' weight, they replaced steel with plastic, and that caused domestic steel production to fall off the charts. Like textiles and garments before them, autos, steel, and shipbuilding are gone; semiconductors are gone, computer hardware is gone, computer software is almost gone. Most well-paying US and Canadian jobs are no longer going to be in large corporations, but in small, locally-owned businesses (SLOBs) in communities around the country.

In this situation, the current school system cannot be allowed to continue. We must replace the industrial-age, top-down, classroom-oriented instruction with individualized and specialized instruction that gives a common core (including the critical and independent thinking that was once reserved for the upper classes) and then layers specialization atop that, based around the students' own interests. It is critical to our national existence that our entry-level workers be independent, self-managed, and aware enough of their own long-term interests that they will set aside funds for their own continuing education and their own retirements as well as for those out-of-work periods that will become an ever more frequent part of everyone's career path.

This emerging educational system may be at least partially Internet-driven. Classrooms are an expensive and unworkable system. Nearly every child will do better with more individual and small-group instruction than they do in the current thirty-plus student classroom. We could invest in smaller class sizes, but that is even more expensive, and still doesn't allow for the needed individualization. Nor will more compliant students have an advantage in the future. Compliant students become lackadaisical workers. Students that challenge assumptions, even in school, become the workers that will bring what businesses need in order to succeed in the carnivorous world of the market.

The SLOBs that power the economy, the enterprises that produce most of the jobs already, and which will continue to produce most of the jobs for the future, cannot accept the miserable output of the industrial age school system any longer. We need people that are:

• Trainable: there is no amount of education, nor of prior experience, which will not require a newly-hired person to be trained on how to perform the specific tasks of the job in the current organization. We need to acknowledge this, and to plan for training everyone from the janitor to the CEO. If schooling is such an ordeal that graduates do not wish to learn anymore, they are useless for most jobs in any small, locally-owned businesses (SLOBs), including owner-managed businesses (OMBs), family-owned businesses (FOBs), minority-owned businesses (MOBs), black-owned businesses (BOBs), hispanic-owned businesses (HOBs), female-owned businesses (FOBs), or community-owned businesses (COBs).


• Self-managing: it isn't acceptable for a supervisor to have to give specific step-by-step instructions to an employee. It is even less acceptable if that "employee" is actually a contractor (legal requirements say that isn't allowed). Schools typically assign end-of-chapter problems for chapter five on Tuesday, and then collect the assignment on Wednesday or in some cases Thursday. This tends to hinder the development of self-management and scheduling, something that is necessary in a job market that is no longer about "jobs" but instead about each individual worker selling his or her services.

The simple answer is that the simple idea of a ?Job? ? really a new idea since 1905 and the advent of the Ford Motor Company ? no longer works but all the rules insist that it does. HR is all about the Job.

But the Job is going away ? even without my polemic. It is dying quietly. Maybe we could hurry it along?

Organizations are being de-capitalized and networked.

Yes, the job is going away, but much of our society is built around the concept of a job. Your credit card is predicated on you paying a certain amount each month. What will happen when no one has fixed or predictable incomes any more? What will happen when you go to apply for an online grad school, and you cannot take their phone calls during "business hours"? What will happen when work schedules are so unpredictable that parents will be unable to work around the set "school schedule" of their children? What happens when the IRS form has to add several more blanks for answers to the "what is your occupation" question?

What happens when nearly all of us have to manage our own time and coordinate our activities with others on a per-project basis, in order to achieve the goals and earn the highest payout? When we each have to become our own sales staff and negotiators? When we each have to make our own arrangements for retirement and other workplace benefits? Are any of us ready?

Sadly, I see so much effort being put into reviving a dying model, that we are not allowing the new model to emerge from the shadows quickly enough. Even if every one of President Obama's economic initiatives worked temporarily, they must eventually fail. The system of companies and jobs that they rely upon is filled with gangrene, and must shortly die. And with the death of the corporate job as the central basis for society and the economy, so also will classroom-based education collapse. We've had over thirty years to see its failures, but have been unwilling to invest in alternatives. Now it is time to release the strictures tying us to industrial age education.