Wednesday, September 21, 2005

Rising Gas Prices and The American Corporation

From another forum, the question was:

"As someone who tags the virtual company/self-employment trend, I've been wondering whether the ongoing and long-term energy crisis will end up promoting self-employment.

For example, will the corporate world start promoting telecommuting to save money on office heating/cooling? "
My thoughts on the matter:

OK, ... I'll bite and offer my opinion. However, this is not a small question.

In a nutshell, no, I do not believe that the current "energy crisis" will have a significant effect on self-employment or will increase the volume of telecommuting. Here are my thoughts on why:

Energy Crisis
First, let's consider the nature of the energy crisis. I believe there is none. The crisis is that our gasoline prices are increasing. However, they are still way below parity with the rest of the world. I was recently in Germany where gas had reached 1.50 EUR per LITER. That is $6.87 per gallon. In mid-August, I heard someone complain that it cost nearly $100 to fill his Hummer. I practically peed myself laughing.

The world is producing 60% more gasoline than it was in the 1970's when we last thought that we were running out of crude. Part of the reason why is that technology advances and finds new ways to drill deeper, recover more, filter more effectively, refine more efficiently, etc.

In no small part, the desire of the energy firms to reduce production capacity as an effort to control supply (by diminishing it) is one factor to the higher gas prices. While our domestic need for fuel has grown, our refining capacity has not.

Let's not forget about other countries. China has increased its need for crude by many fold in the past few decades. We should expect this trend to continue.

However, the world is keeping up with the production needs, carefully controlled to maximize the profits of the energy companies.

Why doesn't expensive fuel drive change?
The clue to this nut is in the last sentance above. Profits. We live in a capitalistic society, and the world seems to be moving more and more towards that structure all over.

However, we often forget what it means to live in a capitalistic society -- that is, if we even took the time to consider it in the first place.

Our society is fueled by profit. Most companies make their strategic and tactical decisions based upon cost. If it is more cost effective to pollute and pay the penalty than to install anti-pollution devices, then so be it. If it is more cost effective to build in obsolence and alienate consumers, then so be it. And so on. The list is endless.

It takes tremendous societal will to make other choices. Our society is not exhibiting that will. Our current administration has, in the past few years, disassembled and disabled more than fifty years of socially motivated legislation and yet remains tremendously popular.

In short, follow the money. What has really changed that companies will agree to extra costs and reduced efficiencies in permitting geographically distributed teams in order to spare their employees the pain of commuting with modestly increased gas prices? Nothing really. Companies with employees at will (which is the vast majority of them) often look at employees as interchangeable, replacable cogs. Most of them are in the highly structured, hierarchical world of corporations.

Therefore, when we follow the money, we see that companies will replace those who whine and drop in productivity because they wish to work from home, because it is more cost effective to do so. Having managed distributed teams for many years, I firmly belive that they are inherintly less efficient that co-located teams. Heck, I have documented metrics to prove it. Companies want to be profitable, therefore they require their employees come to the office in order to produce at an acceptable level. The issue is a non-starter for manufacturing companies. Their employees must come to the plant.

One can see how this might engender the creation of many self-proprietorships and small firms as individuals seek alternatives. However:
  • They will not be a majority of corporate employees
  • Most of them will fail in the first five years.
This is not to diminish the importance of small firms to the US. They still fuel our society by creating new products and ideas. Those that succeed must grow and will eventually face the same challenges as all other non-trivial corporations. Grow and be profitable, or die.

The societal focus remains profit driven.

American Society
Since our society places relatively little value in personal growth and maturity in comparison to instant gratification, companies are not pressured to value individuals. Oh, many say they do, but I have worked in over sixty different companies over twenty years of varied experiences and have seen otherwise. Most people are average. Most of us are normal. However, the majority of people believe they are exceptional. Do you see the trend? Individuals are focused on individual gain. Corporations are focused on corporate gain.

There is no focus on societal gain. No, we are run and motivated by profit. We are the Ferengi.

This doesn't mean that we are doomed. There are small pockets of enlightenment. There are positive signs that the American culture -- which is the largest mix of ethnicities and cultures the world has ever known -- may be moving towards true enlightenment. However, the promise of personal wealth, individual mobility and political freedom, which is still quite unique in the world, lures floods of eager people to the US every year. And so our culture churns, and so our focus remains on ourselves, and so the good of our society suffers as the individuals prosper.

And so the priorities never focus on more efficient energy usage, reuse, conservation, environmental balance. Therefore, the current trends will not change.

I have more to say on the subject. Much, much more, but it will have to wait until I can write a book.

However, there should be sufficient fodder such that a number of readers should be moved to comment. Please do.

No comments:

Post a Comment