Shaulablog

Ah November, and I’ve returned from another 4 day INTENSE-ive. Which now I share with you.

Thursday: Is Capitalism democratic? We often tie democracy and Capitalism together, but what does it mean? In Economics we discussed how having a democracy means people have an ability to participate meaningfully in the decisions that are socially consequential for them. First among such issues – how we distribute the surpluses of production: profit.

Any successful joint enterprise must generate enough revenue to pay the wages of its employees and directors and replace wear on capital equipment needed to run the business. Beyond that, the enterprise generates a surplus. How is this surplus distributed? Today that decision is made primarily by the people who run the enterprise. Not surprisingly, they allocate most of that surplus back to themselves and their shareholders. It’s not entirely unreasonable – it makes sense for society to decide that we should distribute a significant chunk of our surplus to those with a proven track record in making investment grow and encourage them to do more of the same. But the kicker here is that we’re not making that decision “as a society”. A very small group of wealthy leaders make that decision for us.

When we cut taxes for the wealthy and for corporations, what we are really cutting is our right as a society to have our say in how the surplus generated by our joint efforts gets distributed. What we are cutting is democracy. Democracy and capitalism CAN go together, but it’s not mandatory.

Friday: Our Entrepreneur In Residence this session was a winemaker. He told some fascinating stories about the decision of his company to live in harmony with the land as part of making top-notch wine. They would set annual goals that were triple-bottom-line (though he was a bit ahead of the curve so didn’t have that name.) They did the 3-Es: Environment, Equity (social), and Economic. Sample goals might be things like “increase the % of organic cultivation”, “improve employee benefits” and “reduce waste”. He noted that in truth, every goal impacts every other goal – you can’t ignore the Economic impact of your Environment initiatives. When they set a goal of converting to renewable energy, they discovered they couldn’t afford it: it cost 4% more. But because it was a goal they didn’t abandon the idea – they looked harder for ways to cut energy usage and did so, enabling the switch.

I think this is very key: sure, they could have just made those energy usage cuts and kept the extra profit. But business is about priorities in an environment of constant change. You must make choices about where you focus your energies. If they didn’t have that sustainability mission in the first place, they would have been focusing their attentions elsewhere and never thought about those energy cuts. You have to have the mission to get the reward. But did that time and effort invested turn to nothing since it didn’t result in a profit increase? It did make their business better – by insulating them from rising oil prices (aren’t they geniuses now!) and giving them an identity that strengthens their relationships with employees and customers.

Saturday: We gave our “Business Case for Sustainability” presentations, a highly intimidating task given we’d seen a published author on the topic (Bob Willard) do it just the night before. Fortunately I wasn’t in the group he was observing! I was rated decently for style, but didn’t have enough numbers. Several of my fellow students had impressive presentations though. Fellow student David Bangs is well on his way to consulting in energy efficient lighting. Another presenter included the case of New Belgium Brewery – another company that switched at least partially to renewal energy a few years ago and is reaping significant benefits now. In hindsight, it’s great! That presentation, plus the two of the day before got me thinking that the advantage of sustainability is that it protects you against future hazards. Rather than just doing targeted defense and trying to predict the future, all you have to do is invest a little and you mitigate all kinds of risks. Taking care of employees and resources like the environment is a fundamental part of business that has just been neglected because of our focus on what can be measured and the tools we use to do it.

Sunday: Another engrossing day of Economics. Two fun nuggets:

Economic Concentration. CR4 is the % of the market controlled by the top 4 companies in the market (Concentration Ratio). Our hero and prof, Hector, read off some CR4 stats: 95% for the cereal market; 72% for beer;100% for tennis balls. Highly concentrated markets are not good for competition. I realized that the prisoner’s dilemma shows how it’s almost impossible for companies to not end up colluding when there are so few competitors, how can they NOT read each other’s market signals?

The Social Structure of Accumulation. Our GDP depends on consumption. Our consumption is in a vicious cycle (a reinforcing loop!) of low wages to support low prices to be affordable to those low-wage workers. Those low-wage workers are filling the gap with increasingly more credit. Especially after the new bankruptcy law, they are well on their way to discovering Debt Servitude.

Bet they don’t get this at UW!