Something I've pondered during my two quarters at BGI is the question of ideal business size. In the current economic and social climate, large businesses are often vilified for for their impersonal size, tendency to put small companies out of business due to economies of scale, and - let's face it - their incompatibility with the aesthetic sensibilities of the urban bohemian class. Retailers like Walmart, Home Depot, McDonald's and Safeway lose out on popularity points with the socially conscious, and oftentimes the main reason is they're "a national chain." Is this really fair? And what are some benefits of companies being large?
An article I read the other day (and I can't for the life of me remember where it was) argued the idea that, in some cases, big business is superior to small business in the contributions it can make to society. The most obvious is that products become cheaper and more accessible to the middle class (good or bad depending on your viewpoint). But more importantly, there are many products which would simply not be feasible if it weren't for large-scale business with huge R&D budgets.
For example:
- Electronics: Could you imagine if we only had small, local electronics makers? We'd probably just now be getting around to using cell phones, and there would be very little standardization. And I doubt we'd have anything affordable resembling an iPhone or LCD TV. Now, the infrastructure for using those products is a different story, and one might convincingly argue that this is better provided by a public utility.
- Food: I know this might be unpopular, but large-scale food distribution networks make it possible for us to get a steady, predictable supply of food and prevent the famines that were characteristic of early agrarian societies. Western Washington simply couldn't adequately feed the 4 million people living in its urban areas with current technology, at least not year round. Local farms can certainly supplement our diets and provide a solid share of the vegetables we consume during the growing months, but a large portion of our calories come from elsewhere.
- Customer service and convenience: The scale of larger businesses often allows them to provide better warranties that can be serviced anywhere, whereas small companies often operate on tight margins and have a single location. Take REI: customers can buy a product with the knowledge that they can return that product if it doesn't work out, and that the company will always be there to honor that warranty (too big to fail?) This is also the case with the manufacturers of many consumer goods.
- Employee benefits: Small businesses (particularly retailers and restaurants) are often run on extremely tight margins, and one of the first things to go is often employee benefits, such as health insurance and retirement accounts. Large companies have the administrative ability and revenue to cover these benefits. In addition, employee redundancy often allows staff more flexibility in taking time off. Sure, the government should probably be providing universal healthcare, but some of these benefits are really valuable and can't be easily replicated by the government.
- Opportunities for advancement and diverse work: In a small company, oftentimes the only opportunity to move up is by moving to a different firm, whereas large firms offer more opportunities for advancement as well as trying different types of work.
Hi Chris, good viewpoints on big business here. I think that as always the truth lies somewhere in the middle. Your point about inovations like electronics is well put. Without big business offering a market for applied science discoveries we would not be where we are today with regards to technology. I woud suggest that local food, especially in places like the northwest, is entirely possible. Take a look around at all of the marginal land where the only thing cultivated is grass. If we wanted to we as a society could source most of our produce within walking distance. Of course some sacrifices, like tomatoes in January, would have to be made.
ReplyDeleteThanks for this post, Chris. I'm glad to see you willing to explore ideas that the PC BGI community routinely dismisses without much conversation or thought.
ReplyDeleteMy main worry about the emphasis on local is that it will be too little too late to address some of the big issues facing us. The energy industry may be disproportionately contributing to climate change today, but if we're truly going to solve the problem in time to avert a major disaster, the Big Players are going to have to join the revolution. Impact, for good or for ill, still frequently scales with size.
You are such a capitalist pig.
ReplyDeleteI think there could be even more benefits from large companies if they organized themselves differently. Some probably do this, but this quarter I was really struck by Gifford's comment that business seems to go through swings from innovation to micro-management. At large companies, part of establishing these margins comes from micromanagement at the expense of innovation. Perhaps we can have both? Carol Sanford said she organizes all businesses she works with to be flatter and more empowering of employees. She seemed to think you could have innovation and strong performance if you invested in your workers.. I hope she is right, because I belong at a company of 50 or less.