#60 Being Fair. Part of POTUS’ Project on Manufacturing

(Readers: Please note the blog about the 5th revolution in the US is constructed as a story. While not all chapters are linked, after a few recent entries, you might want to start at the beginning. More about the blog and about the author. )

Scene: Jordan and Matt, Jordan’s Office

Jordan: “Matt, thanks for taking time to talk again.”
Matt: “Jordan, the least I could do. You spent a lot of time preparing for the POTUS project. My guess is these comments will be a good add.”
Jordan: “Hope so. Some of the ideas stem from actions by GM. Others are based on recent experience.”
Matt: “OK, let’s get started. What’s the theme? What idea…or ideas do we want to add?”
Jordan: “The idea might seem obvious or naïve or both. And it might be. I want to talk about fairness.”
Matt: “Mmmm, that is interesting. And talking about ‘fairness’ does seem appropriate. We never talked specifically about it. Implied, yes but not fairness as a specific topic.”
Jordan: “Reason I bring it up is some recent experience and a conversation with a long-time friend. I was going to say old friend but she would not like that.”
Matt: “What happened?”
Jordan: “Incidents with the cell-phone company and airlines and TSA. The conversation with my friend led to a discussion of an earlier incident with GM – not product but culture.”
Matt: “I need some details to help understand the issue.”
Jordan: “I figured you might. Rather than take your time now, I wrote several papers describing what happened.”
Matt: “Good. I’ll read those later. What was your conclusion?”
Jordan: “Simple. Fairness is a critical component for long-term success of an organization.”
Matt: “Keep going.”
Jordan: “Do you deal with people or companies that have a ‘heads I win, tails you lose’ approach?
Matt: “Not if I can help it.”
Jordan: “Everyone feels the same way. Why get the shaft in every situation?”
Matt: “So how does fairness affect POTUS’ policy on rebuilding US manufacturing?”
Jordan: “Fairness needs to be a key component. We talked a lot about how GM became a money machine and then started to focus on earnings and slid into bankruptcy. And then the turmoil over ignoring obvious safety issues.”
Matt: “You’re saying…if I hear you correctly…the overarching issue for GM’s downfall was fairness, or really lack of fairness.”
Jordan: “Fairness for customers. Fairness for employees. Fairness for suppliers. And fairness for people who sell the product.”
Matt: “What about fairness for the community?”
Jordan: “Great point. You’ll see in one of the write-ups that I think GM’s chairman in the 1980’s, Roger Smith, took revenge on Flint, Michigan.”
Matt: “Really? I’ll read the paper. Now, how do we translate fairness into some policy recommendations?”
Jordan: “Take your question about fairness to the community. Tell me why as a country do we encourage states to recruit businesses from other states?”
Matt: “Economic development, I suppose.”
Jordan: “Economic development for whom? The policy forces a winner and a loser. The state where the business moved considers itself the winner. The state where the business moved from is the loser. In fact, there is probably a net loss when add the incentives are added up. The US as a country gains nothing by the move. ”
Matt: “What about competitiveness of the company moving? Lower wages will make the company more competitive.”
Jordan: “That’s often the argument but it’s not necessarily true. In fact, I’d claim it is not true far more often than true. Why not increase worker productivity enough to offset any wage differential?”
Matt: “You think companies can really increase productivity to offset wage increases?”
Jordan: “Did we talk about the company I ran in California?”
Matt: “Not sure. What’s relevant?”
Jordan: “Short story is with some changes to the manufacturing process we reduced labor cost dramatically.”
Matt: “How much?
Jordan: “We could have doubled the wages of workers in California and paid workers in China zero and still come out ahead.”
Matt: “What? You could pay workers in California twice what they were making. Then pay workers in China nothing and still have lower costs?”
Jordan: “You got it. And the reason is twofold. First reason is increased productivity. By the way, we did not lay off any workers. We actually added workers.”
Matt: “You added workers and increased output? That’s un-American.”
Jordan: “I know. Counter intuitive, huh? The second reason is all the other costs associated with producing in a remote location.”
Matt: “You had a term for that. I remember now…a holistic approach to cost.”
Jordan: “Taking all costs into account.”
Matt: “Is that example a one-of-a-kind or are there more examples?”
Jordan: “An example few people know about is the coal industry.”
Matt: “Not a very popular topic, especially among environmentalists.”
Jordan: “Not a very popular topic among former coal miners either.”
Matt: “What do you mean, former coal miners? Still lots of coal being produced in the US.”
Jordan: “Actually, production is higher than during the 1970’s.”
Matt: “What about employment. You said former miners.”
Jordan: “Productivity is way up. We need to confirm these numbers but I think employment is down from about 250,000 miners to only about 50,000 today.”
Matt: “That’s all that work in coal mining? That’s a blip on the employment radar screen. That’s it?”
Jordan: “All because of productivity.”
Matt: “Makes you wonder why some politicians claim environmental laws will destroy coal mining jobs.”
Jordan: “The coal industry destroyed the jobs through productivity.”
Matt: “That’s a good and bad example for POTUS. Good because technology can increase output. Bad because of reduced employment.”
Jordan: “We need a balanced policy in manufacturing policy. Companies should adopt technology but not just dump workers on society. They have an obligation to their employees.”
Matt: “How can that policy work? Sounds like socialism. Won’t such a policy just encourage companies to produce outside the US?”
Jordan: “Not if the policy is structured properly. We’re talking about being fair. If some people view being fair as socialistic, then so be it. But being fair does not mean being equal.”
Matt: “You’re really hammering on being fair. Few people ever talk about companies being fair.”
Jordan: “Lack of fairness is why we had a revolution. In fact, lack of fairness has been the cause of each revolution in this country…”
Matt: “…and, if you think about it, elsewhere as well.”
Jordan: “So why not make being fair part of the manufacturing policy recommendations for POTUS? Maybe fair should be part of every policy in Washington.”
Matt: “Jordan, you might be on to something. Get people to move away from hard-core ideology…”
Jordan: “…which most ideologues do not really understand…”
Matt: “…and focus on fairness. Sounds so simple.”
Jordan: “It is simple. Start addressing problems with the premise, ‘What’s fair?’ Then work out the details.”
Matt: “Listen, I gotta run. And I need to start drafting a formal paper for POTUS. But I want to make sure we include your thoughts about fairness.”
Jordan: “I’ve written a couple of papers on fairness. I should write a couple more.”
Matt: “If you want. But I’m a reporter. I’m used to working from interviews with people. If it’s OK with people you talk to, just record the interview and send me the audio or the transcript.”
Jordan: “Alright. We each have our assignments.”
Matt: “Let’s keep in touch and meet periodically.”
Jordan: “Deal. And just to be fair, I’ll buy coffee next time.
Matt: “No, just to be fair, I’ll buy.”
Jordan: “Get out of here.”