If you read this blog, you know that I am a big fan of Malcolm Gladwell. And as much as I like his books, I equally like his essays (all but the very most recent archived here).
Here are some excerpts from his essay entitled The Risk Pool. (I re-read this essay after it was linked to in this article by Timothy Noah at Slate.com). It’s about – everything. Pensions, health care, technological advances, Peter Drucker… reading this feels like en education in 20th century business.
Excerpt number one – the dominance of Bethlehem Steel:
“In 1956, Eugene Grace, the head of Bethlehem Steel, was the country’s best- paid executive. Eleven of the country’s eighteen top-earning executives that year, in fact, worked for Bethlehem Steel. In 1955, when the American Iron and Steel Institute had its annual meeting, at the Waldorf-Astoria, in New York, the No. 2 at Bethlehem Steel, Arthur Homer, made a bold forecast: domestic demand for steel, he said, would increase by fifty per cent over the next fifteen years. “As someone has said, the American people are wanters,” he told the audience of twelve hundred industry executives. “Their wants are going to require a great deal of steel.”
Excerpt number two — GM’s President makes a lot of money – and pays a lot in taxes:
The president of General Motors at the time was Charles E. Wilson, known as Engine Charlie. Wilson was one of the highest-paid corporate executives in America, earning $586,100 (and paying, incidentally, $430,350 in taxes).
Excerpt number three — Peter Drucker rightly observes/predicts, confirming Taleb’s (The Black Swan) truism — “nobody knows anything” (except maybe Drucker):
The most influential management theorist of the twentieth century was Peter Drucker, who, in 1950, wrote an extraordinarily prescient article for Harper’s entitled “The Mirage of Pensions.” It ought to be reprinted for every steelworker, airline mechanic, and autoworker who is worried about his retirement. Drucker simply couldn’t see how the pension plans on the table at companies like G.M. could ever work. “For such a plan to give real security, the financial strength of the company and its economic success must be reasonably secure for the next forty years,” Drucker wrote. “But is there any one company or any one industry whose future can be predicted with certainty for even ten years ahead?” He concluded, “The recent pension plans thus offer no more security against the big bad wolf of old age than the little piggy’s house of straw.”
Here are some “lessons” one might draw from this essay:
1. There was a time when the rich really did pay higher taxes. And this is from a period when America really flourished. There may be a connection.
2. Technology really does endanger worker’s jobs, and change really does endanger the long-term health of companies. Both Bethlehem Steel, and ultimately General Motors, went bankrupt. There was a time when no one (except Drucker) could have imagined that these behemoths might someday face the end of their reign.
3. No company is really big enough to take care of the pensions and the health care of all of its workers and retired workers. Because, tomorrow, as is now quite obvious, a company (if it has survived) will likely have a smaller pool of workers. Here’s another excerpt:
When Bethlehem Steel filed for bankruptcy (in 2001), it owed about four billion dollars to its pension plan, and had another three billion dollars in unmet health-care obligations. Two years later, in 2003, the pension fund was terminated and handed over to the federal government’s Pension Benefit Guaranty Corporation. The assets of the company—Sparrows Point and a handful of other steel mills in the Midwest—were sold to the New York-based investor Wilbur Ross…
4. The more we know, the more we will be prepared for the next surprise. I have long felt that this simple saying is important to remember: “the more you know, the more you know.”
And tomorrow will be different from today. And then the next tomorrow will be even more different. So, knowing the vast sweep of business struggles and change helps us not be as surprised by the next surprise.
Let me encourage you to read the Gladwell essay. It will make you think.
(To purchase my synopses of Gladwell’s books The Tipping Point, Blink, and Outliers, with audio + handout, go to our companion site, 15minutebusinessbooks.com).