I thought this would be a book criticizing Google and its many sinister practices of gathering, albeit legally since we all “accept” the Terms and Conditions, of our personal information for profit. Just this morning I had to re-sign in to my Google email account and the only way Google would allow my emails to download was to agree the allow Google peer at my PC. I’ll need to find a new account at some point. The book was not really about Google per se, but about American companies in general; the author gets way deep into specifics. The subtitle is; “How Growth Became the Enemy of Prosperity”.
“Google workers are less the beneficiaries of an expanding company than they are its rapidly consumed resources. The average employee leaves within a year2—some to accept better positions at other companies but most of them simply to break free of the constant pressure to perform. Taking the bus gives them more time to work or just relax instead of driving. They are human beings.”
Years ago (I left in 1999) I worked for a Fortune 500 company. I was in lower management, but was in enough meetings to see how a well-run company (~$5,000,000,000.00 revenue per year) was being torn apart by the whims of institutional investors and their demands. I worked for Browning-Ferris Industries (waste business) and our business had hundreds of “districts”. We had a helpful and efficient IT staff. Some investors complained that our overhead costs were too high; complained enough to force our CEO to cut out our IT staff…gone. A group of them started their own company and promptly provided those services to us at an increased cost to the company. Perhaps at best it was a wash when you considered salaries, benefits, and overhead, but what we never got again, at least ultimately, was dedicated service.
This new company comprised the mostly the same folks, but when we needed something there were extra steps involved (purchase orders, billing, bill paying, etc.). That new company also sought out other customers who would naturally vie for our their attention…a loss of dedication. Because an institutional investor complained, our company made what I think was a bad decision, probably cost the company more money, and piggybacked more, similar decisions, that put us in a position to be acquired by a much, much smaller rival. These investors, in my view, were not interested in the company; they just wanted the company to have high stock prices so they could make more money. Again, in my view, they made the company less strong. That still bothers me 20 years later.
I’ll sound old here, but I remember taking a class on investing when I got out of college. A friend and I learned Price over Earnings, etc. I even would delve into Barrons weekly to look at stocks. My father even sold me a few shares of some of his stocks to get me started. I had a few really good stocks that paid dividends which I reinvested and they grew in value. The stock price never really grew rapidly, but my return was almost always better than 10%. Then the need for “Growth” became the norm.
This author mirrors my view that the need for growth has ruined the market. A company turns a great profit, but “the profit wasn’t as much as anticipated” so the stock price goes down. The value of a business is more about how to pump the market price up so folks can sell at a profit regardless of what it does to the company. My wife and I have a decent portion of our retirement in mutual funds and this makes me very nervous.
Author Douglas Rushkoff goes into great detail about the problems and offers detailed solutions. I generally like details and solutions, but this one got pretty deep. At least the first chapters should be required reading for all adults. I’ll end this very long review with some quotes:
“In retrospect, it shouldn’t have seemed so strange to argue that the best way for a business to reach prosperity is simply to earn a profit. But that’s how convoluted things had gotten in the digital startup landscape by 2016. Companies sought to make their founders rich not by earning revenue, but by selling themselves or their stock to new rounds of investors. A company itself—a new app, social platform, or technology—was seen less as a potentially profitable entity than as the potentially blockbuster story through which to market shares of stock. As a fictional CEO on the popular HBO satire Silicon Valley put it, “The product isn’t the platform, and the product isn’t your algorithm, either. And it’s not even the software. . . . It’s the stock.”1 In just one year, young tech entrepreneurs have stopped comparing how much funding they’ve won and at how high a valuation, and instead compete to see who has managed to get by on less investment and with a lower valuation. They seek to avoid the fate of companies like Twitter, which earns over $2 billion a year but is a failure according to Wall Street because it has plateaued at that level. Shareholders have realized they won’t be able to recoup a hundred times their initial investments, and would rather drive the company into the ground than permit it to carry on as a profitable but full-grown company.”
“Users are only slowly coming to grips with the fact that they are not Facebook’s customers but its product. Many Americans reacted in horror to the news that Facebook was conducting psychological experiments on its users. 20 But if they’d had any real awareness of how the company earns revenue, they shouldn’t have been surprised at all. Facebook was simply attempting to show that the kinds of emotional contagion that occur in real life also happen online.”
“Pop stars like Jay Z take it to a new level, distributing free music apps that log users’ contacts, geolocation, and even phone records, all to scrape more user data,26 which is in turn sold to advertisers and market researchers. It’s as if no matter what business you’re in, profit ultimately rests on your ability to glean and sell the data associated with your transactions.”
“Corporations in particular are duty bound to grow by any means necessary. For Coke, Pepsi, Exxon, and Citibank, there’s no such thing as “big enough”; every aspect of their operations is geared toward meeting new growth targets perpetually. That’s because, like a shark that must move in order to breathe, corporations must grow in order to survive.”
There are just so many examples here. The good news is that things are starting to shift towards improvement…we can only hope.
“People throwing rocks at the Google bus will be remembered as the tremor before the quake.”