10-28-2022, 02:37 AM
Having brought material from this thread into another discussion, I would like to revive it.
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This is microeconomics, but we need also look at macroeconomics. Where the bulk of companies are as a share of the economy matters greatly. Start-ups are rarely profitable enough to tax directly. Employees are often living heavily upon promises of an employer and (if young) raw talent. Firms in this category typically own few assets that can be taxed, and their payrolls are small. Research and development matter more than unavailable quick income. This is almost the same in "go-go" companies. In adolescence, profits are starting to become significant, and a company needs to find better facilities as its customer base, production, and cash flow increases.
Plenty of traps exist for companies in infancy. Maybe the innovative object of commerce goes obsolete before the company takes off. Nobody has any idea of what to do then, so the company makes one blunder after another that eats its assets. As a biological analogy, adult alligators eat dogs, but dogs can eat baby alligators easily. Perhaps lacking funds but looking sort-of-OK as an acquisition its owners get an offer that they can't refuse from a company already past prime. The ideal situation and temptation is that the older and less flexible firm adds some infusions of cash into processes and finds the promising talent useful in giving the older and larger corporation a new lease on life. The new division is full of bulls in china shops who ill fit a company that has rigid rules and a staid culture.
At best, companies through adolescence are the future for the economic health of the overall economy. They are not the basis for current prosperity through public investment. Payrolls are small, and many of the employees are being paid in promises (like cheap stock) instead of cash.
Prime is best. People are still able to get ahead if they have genuine talent, and cash flow is getting significant. Businesses in prime start to concern themselves with image, and they need to have buildings that look good to potential customers. Payrolls are larger both in income per worker and head-count, so employers are easier to tax by taxing authorities. These companies start to have nicer buildings and thus end up paying more in property taxes that fund public services from schools to streets to schools. The payoff in public investment in schools that educated workers in such places is significant enough to allow a consumer economy. People start to be paid well, so the consumer economy blooms.
Obviously to get companies in this range one needs to have had a healthy number of start-ups that have evaded the problems of under-capitalization, poor planning, and weak markets. A social order that offers little opportunity for starting new businesses or that dedicates its resources into something unlikely to result in economic growth (think of the Silent generation for largely starting professional practices and government contractors or put their entrepreneurial skills largely into investment banking), then there would not be much business in the prime zone about twenty years after the Silent start entering adulthood. By the late 1970's that alone would create economic stagnation.
Companies at their peak have good financial statements, but they are losing their entrepreneurial qualities. They lose their flexibility and their ability to innovate. Everything becomes a matter of spending money to solve problems, and there is plenty of money to invest in such. They are easy to tax, as they have high profits and attractive buildings. Governments collect income and property taxes, and employees are being paid well. These companies have nice buildings for property-tax assessment. But this peak is where Adizes sees the Fall. After this comes the downward spiral.
Aristocratic companies have reduced expectations of growth. They reward executives lavishly for doing what they have been doing successfully. Innovation becomes a threat to entrenched executives. They become conformist in behavior and style. Dress codes may be imposed. The firm often looks at limiting risk instead of innovating and seeking growth. More concern goes into controls, benefits, and edifices than into research and development. They tend to not attract promising young employees who might make waves.
Competitors start outpacing them. Their patents and other intellectual property start to expire or become irrelevant. Too many people are overpaid because these companies cannot find innovative people. Problems built into the company continue to grow, and they may merge with the systems of control so that the problems are hard to cast off. Some lines become unprofitable but can't be shucked off.
... If a huge share of businesses are in this area, then the age of economic stagnation is nigh.
In recrimination, companies that have started the decline as aristocratic entities start to see problems, and usually cast off the people most likely to solve those problems. People in R&D, marketing, and finance find themselves the targets of back-stabbing. In recrimination, the vitality of the company is in an undeniable tailspin. The best that the leaders of a company in this stage can hope for is a personally-soft landing. Profitability once formidable has been gutted. The firm may be more concerned with survival by connecting to entities that depend upon it having a bloated payroll, property to tax, and a need for the stuff for which that company may be the last remaining survivor. Its productivity is slight but its bureaucracy dominates everything. Politicians on the Right need the campaign contributions. Politicians on the Left need to keep this company's employees on the payroll so that those employees have cause to vote. Institutions may depend upon their meager dividends for stability. Many are government contractors who depend upon huge requisitions as contracts; these could never survive in a free market. These are the companies "too big to fail" but perhaps even worse, "to corrupt to save" or "too inflexible to survive". These are the first companies to go under in an economic collapse and might be saved only with huge infusions of cash that might otherwise better go elsewhere.
This often has connections to the generational cycle. A business lifecycle may fit an employee. If one has legitimate talent then one obviously wants to latch onto a company with growth potential early. Just because a company is profitable may not mean that one is a smooth fit. One may lack the "polish" appropriate for a company at or just after the peak and one cannot learn that on the job. As one proves oneself one participates more in the consumer economy and perhaps takes out a mortgage loan on a house and starts having a genuine family of one's own. One quits buying elderly and decrepit used cars and buys new ones. Stability of income becomes more important as one has college-age kids who better suit white-collar than blue-collar work (and much blue-collar work requires considerable training now, so that may not be much of a distinction). A company in control of its assets may be better for one at that stage of life than one with unlimited potential for business growth as might a start-up. If one hasn't wrecked one's body with obesity, drugs, booze, tobacco, and reckless sexuality, then at age 55 or so all that matters is that there be a good retirement plan and that one survive there until one retires.
It also relates to the overall economic cycle of the Saeculum. The solutions to most economic needs is start-up companies to which talented people can latch onto and grow, and when government favors something else (like speculative frenzies near the end of a 3T or crony capitalism at any time that favors entities Too Big to Fail, Too Inflexible to Survive, or Too Corrupt to Save), then the economy is on the brink of bad times. Businesses fail and tax revenues plummet as people lose their jobs and cannot find new ones. If too many people have been working for firms that are in the stage of bureaucracy, then impressive payrolls disappear and people often too inflexible to start over become a large volume of the Unemployed.
This is microeconomics, but we need also look at macroeconomics. Where the bulk of companies are as a share of the economy matters greatly. Start-ups are rarely profitable enough to tax directly. Employees are often living heavily upon promises of an employer and (if young) raw talent. Firms in this category typically own few assets that can be taxed, and their payrolls are small. Research and development matter more than unavailable quick income. This is almost the same in "go-go" companies. In adolescence, profits are starting to become significant, and a company needs to find better facilities as its customer base, production, and cash flow increases.
Plenty of traps exist for companies in infancy. Maybe the innovative object of commerce goes obsolete before the company takes off. Nobody has any idea of what to do then, so the company makes one blunder after another that eats its assets. As a biological analogy, adult alligators eat dogs, but dogs can eat baby alligators easily. Perhaps lacking funds but looking sort-of-OK as an acquisition its owners get an offer that they can't refuse from a company already past prime. The ideal situation and temptation is that the older and less flexible firm adds some infusions of cash into processes and finds the promising talent useful in giving the older and larger corporation a new lease on life. The new division is full of bulls in china shops who ill fit a company that has rigid rules and a staid culture.
At best, companies through adolescence are the future for the economic health of the overall economy. They are not the basis for current prosperity through public investment. Payrolls are small, and many of the employees are being paid in promises (like cheap stock) instead of cash.
Prime is best. People are still able to get ahead if they have genuine talent, and cash flow is getting significant. Businesses in prime start to concern themselves with image, and they need to have buildings that look good to potential customers. Payrolls are larger both in income per worker and head-count, so employers are easier to tax by taxing authorities. These companies start to have nicer buildings and thus end up paying more in property taxes that fund public services from schools to streets to schools. The payoff in public investment in schools that educated workers in such places is significant enough to allow a consumer economy. People start to be paid well, so the consumer economy blooms.
Obviously to get companies in this range one needs to have had a healthy number of start-ups that have evaded the problems of under-capitalization, poor planning, and weak markets. A social order that offers little opportunity for starting new businesses or that dedicates its resources into something unlikely to result in economic growth (think of the Silent generation for largely starting professional practices and government contractors or put their entrepreneurial skills largely into investment banking), then there would not be much business in the prime zone about twenty years after the Silent start entering adulthood. By the late 1970's that alone would create economic stagnation.
Companies at their peak have good financial statements, but they are losing their entrepreneurial qualities. They lose their flexibility and their ability to innovate. Everything becomes a matter of spending money to solve problems, and there is plenty of money to invest in such. They are easy to tax, as they have high profits and attractive buildings. Governments collect income and property taxes, and employees are being paid well. These companies have nice buildings for property-tax assessment. But this peak is where Adizes sees the Fall. After this comes the downward spiral.
Aristocratic companies have reduced expectations of growth. They reward executives lavishly for doing what they have been doing successfully. Innovation becomes a threat to entrenched executives. They become conformist in behavior and style. Dress codes may be imposed. The firm often looks at limiting risk instead of innovating and seeking growth. More concern goes into controls, benefits, and edifices than into research and development. They tend to not attract promising young employees who might make waves.
Competitors start outpacing them. Their patents and other intellectual property start to expire or become irrelevant. Too many people are overpaid because these companies cannot find innovative people. Problems built into the company continue to grow, and they may merge with the systems of control so that the problems are hard to cast off. Some lines become unprofitable but can't be shucked off.
... If a huge share of businesses are in this area, then the age of economic stagnation is nigh.
In recrimination, companies that have started the decline as aristocratic entities start to see problems, and usually cast off the people most likely to solve those problems. People in R&D, marketing, and finance find themselves the targets of back-stabbing. In recrimination, the vitality of the company is in an undeniable tailspin. The best that the leaders of a company in this stage can hope for is a personally-soft landing. Profitability once formidable has been gutted. The firm may be more concerned with survival by connecting to entities that depend upon it having a bloated payroll, property to tax, and a need for the stuff for which that company may be the last remaining survivor. Its productivity is slight but its bureaucracy dominates everything. Politicians on the Right need the campaign contributions. Politicians on the Left need to keep this company's employees on the payroll so that those employees have cause to vote. Institutions may depend upon their meager dividends for stability. Many are government contractors who depend upon huge requisitions as contracts; these could never survive in a free market. These are the companies "too big to fail" but perhaps even worse, "to corrupt to save" or "too inflexible to survive". These are the first companies to go under in an economic collapse and might be saved only with huge infusions of cash that might otherwise better go elsewhere.
This often has connections to the generational cycle. A business lifecycle may fit an employee. If one has legitimate talent then one obviously wants to latch onto a company with growth potential early. Just because a company is profitable may not mean that one is a smooth fit. One may lack the "polish" appropriate for a company at or just after the peak and one cannot learn that on the job. As one proves oneself one participates more in the consumer economy and perhaps takes out a mortgage loan on a house and starts having a genuine family of one's own. One quits buying elderly and decrepit used cars and buys new ones. Stability of income becomes more important as one has college-age kids who better suit white-collar than blue-collar work (and much blue-collar work requires considerable training now, so that may not be much of a distinction). A company in control of its assets may be better for one at that stage of life than one with unlimited potential for business growth as might a start-up. If one hasn't wrecked one's body with obesity, drugs, booze, tobacco, and reckless sexuality, then at age 55 or so all that matters is that there be a good retirement plan and that one survive there until one retires.
It also relates to the overall economic cycle of the Saeculum. The solutions to most economic needs is start-up companies to which talented people can latch onto and grow, and when government favors something else (like speculative frenzies near the end of a 3T or crony capitalism at any time that favors entities Too Big to Fail, Too Inflexible to Survive, or Too Corrupt to Save), then the economy is on the brink of bad times. Businesses fail and tax revenues plummet as people lose their jobs and cannot find new ones. If too many people have been working for firms that are in the stage of bureaucracy, then impressive payrolls disappear and people often too inflexible to start over become a large volume of the Unemployed.
The ideal subject of totalitarian rule is not the convinced Nazi or the dedicated Communist but instead the people for whom the distinction between fact and fiction, true and false, no longer exists -- Hannah Arendt.