2012 Isn’t The End Of The World But It Is A Time Of Transition

For the past few months, I’ve laid back and soaked up the goings on in publishing, and the economy in general. Here are a few things I expect to see as we wrap up 2012 and head into the beyond.

1. Apple is in the process of cutting its own sizably profitable throat

I was once one of Apple’s biggest proponents. This was back when they produced the best computers going, especially when paired head to head with Microsoft’s crap-of-the-month they’ve spent the past 15 years cranking out. But no more. They are far too expensive in an atmosphere with downward pressure on device prices, and are showing far too many issues with signature devices like the iPhone. The iPad Mini is nothing if not a cannibal that has the potential to swallow the market for the full size (and pricier) model whole. Add to that the fact that, fairly or otherwise (I say fairly) Apple is a poster child for exploitative labor practices, offshoring of jobs and stashing large profits out of the country to avoid taxes, and I see a company who has reached its apex and is poised to begin the long decline down.  If Steve Jobs were still alive, I’d give them a shot to pull out of it, but he’s not, and Apple is in the process of becoming just another mega corporation focusing on profit at the expense of all else.

There’s a reason Apple is putting more and more resources towards patent lawsuits. It’s corporate complacency. Live off the value you have today, and do everything you can to stifle competition or progress beyond that point. It might work for a few years, but it’s a long-term loser bet. Much like Microsoft, the world will pass them by and they’ll learn that it’s much harder to play catch up than be the industry leader, especially after your corporate culture shifts from profit through new innovation to profit through exploitation of past innovation.

2. Consolidation amongst the largest publishers is a sign of desperation not forward-thinking strategy

Corporate consolidation and mergers come in many forms. Sometimes, they are aggressive, competitive moves, other times they are backs-to-the-wall defensive maneuvers. The Big Six mergers going on are in the latter group and, as such, are little more than time-buying exercises. The Disney purchase of Lucasfilm is just the opposite. The mouse didn’t snap up Star Wars to squat on the crazy-lucrative rights, they intend to use them. Publishers, on the other hand, are merging not as an aggressive bold move, but as a means of cutting costs and combining assets to add sheer bulk in some kind of misguided dick-measuring contest with the big retailer of the moment, Amazon.

I expect the Big Six will filter down to three, possibly even two within the next two years. The remaining giants aren’t going anywhere, they’ll still be raking in money, still produce bestsellers by the bushel, still be big name players, but while they get individually bigger, the overall share of the market once held by all six separate companies combined will decline.

While this consolidation will very likely appear positive on the accounting ledgers, in the real world, it means less skilled people employed in traditional publishing, less opportunities to get books published traditionally, less competition for authors between traditional houses, lower advances, lower royalties and more stringently pro-publisher contracts with increasing restrictions on writers. If you’re one of those people who still see a traditionally published book as something to aspire to, your work just got a lot more difficult and a lot less potentially lucrative.

If anything, I expect consolidation among the industry leaders will drive more writers to control their own destinies. In fact, I would not be the least bit surprised if, eventually, the bulk of the work coming out of the last of the giants winds up as work-for-hire ghost written material. Anonymous author-mills, basically.

3. Any improvement in publishing’s fate depends on a functioning economy

We just had an election that comes at a pivotal time for us and the one obvious problem that’s suffocating us went completely unaddressed. How, exactly, do we convince the corporate world to reinvest in its workforce through better pay and benefits, thereby investing in the market for its own products? Many corporations have become virtual crack-whores to ever-increasing margins, and the du jour move of the moment is to cut everything not nailed down from your employee base to improve the bottom line. We need to convince them to break that addiction, sacrifice some of those profits in the short term for the betterment of everyone, and mostly, their own long term bottom line.

The current system is clearly unsustainable. They need customers, and lots of them, which they’re not going to get if corporations en mass continue to bleed the workforce of any and all disposable income to pad their own criminally undertaxed capital gains. It’s doubly damaging condition because egregiously low wages also add to all of our tax bills. Walmart, for instance, made $15 billion in profit last year. Their employees, however, were paid over $2 billion in government assistance. That means we subsidized billions in Walmart profits with our taxes. But its the poor single mother on food stamps who’s the parasite, right? As things are now, obscene percentages of capital are being sequestered totally out of our economy, with more being drained every day. That has to stop, and it has nothing to do with tax rates. It’s a grab-the-cash-right-now strategy, and it’s sacrificing the future for everybody, rich and poor alike, to support gluttonous profits today.

It’s a common problem. Publishers suffer from it. They invest less and less into the actual productive areas of their business and more into their corporate structure. In doing so, the financial barons on Wall Street reward them for their stats on paper, which always look good right away but don’t reflect the long-term negative consequences of the cuts. Those come later, and inevitably lead to more cuts. It’s a death spiral writ large. Amazon, by contrast, does reinvest large chunks of profit back into its business, and Wall Street punishes them for it routinely. It’s a good thing Jeff Bezos doesn’t seem to care what Wall Street thinks or Amazon might never have been anything more than one of the online retail pack. Our financial system, where nearly all of our resources are controlled, rewards corporate behavior that is destructive to the real-world economy and punishes actions that help it. How a system that was originally intended to allow companies to raise money with which to expand business has been allowed to mutate into this self-sustaining casino game is one of the great disgraces of the late 20th century. Our ends are fundamentally at odds with the ends of the financial sector.

These things have to change, or our very basic social fabric risks being torn asunder. It’s not going to matter what ebooks cost if people can barely afford food. A severe rich/poor class system will rip itself apart in this country. And all it takes to fix it is if our corporate leaders give up a small percentage of profits in favor of better compensation for employees. Stop hoarding your money overseas, pay your damn taxes, and pay your employees a fair, living wage. Actually give something back to the market you’re getting filthy rich on. There’s nothing to harvest if you don’t plant a few seeds. I’m not sure how, or even if we can change our corporate culture from its current parasitical nature back into a sustainable one, but I do know that if we don’t, the changes we’ve seen the past few years are but small scratches on the surface of what’s yet to come.

4. I’m holding to my opinion that the smart money is for people to develop their own skills and use them entrepreneurially

We can no longer count on steady, good paying employment on a wide scale. Companies aren’t going to give up the exploitative profit margins they’ve grown used to without being strong-armed, and any means of forcing them will have immediate, very ugly consequences. So let’s not do that. People everywhere need to cultivate ways to make money outside of traditional employment. The get-a-job thing is becoming a worse and worse deal by the day for workers and unless we are all happy ending up as poverty stricken wage slaves, we need to start creating our own economic opportunities. For writers, this means get off the fence and learn publishing. “I just wanna write,” sounds great and all, but it’s becoming increasingly unrealistic. Not knowing the business side intimately isn’t going to be a matter of choice much longer, either figure it out or get stuck under the boot heel of a giant publisher. It’s not an intriguing little side-light to consider any longer, but a virtual requirement for your long-term survival interests.

And it’s getting to be the same with everyone else. Wide-scale employment is becoming a race to the bottom, creating bottom-rung, benefit-less, minimum wage level jobs in droves while shedding living wage jobs. Figuring out how to generate adequate incomes on our own is the next essential skill we’re all going to need. Getting started sooner than later is probably going to be a very good idea.

The Big Picture: Should we be a nation of 300 million employees or 300 million entrepreneurs?

I try not to be political. I don’t try that hard, obviously, but I do stop myself for diving full on headlong into it most days. Politics just disgusts me so much and I can get enraged so easily. Sometimes, I just can’t avoid it, though. It’s election season, so it’s absolutely everywhere and it just annoys me to see all the people who think this pomp and circumstance makes a damn bit of difference. Even if your guy wins, the day after inauguration day isn’t going to be any different than the day before. I’ve seen enough presidential elections in my lifetime not to get taken in by the rhetoric anymore. They’re all reactive anyway. Government policy generally follows what people start doing on their own. I’ve always believed that the real strength of a President is how he would respond in a genuine crisis not how he governs. I haven’t heard that question asked yet this year. Have we gone so long without a genuine, far reaching crisis that we’ve forgotten that totally fucked up shit can come outta left field with no notice and how one deals with that can be a pretty important trait?

See what I mean? I wasn’t even thinking presidential politics when I started typing, but it just took over. Dammit! What I wanted to talk about was economics (I know, thrilling!) or more specifically, what kind of economy we need to have because, I don’t know if you’ve noticed, but our’s ain’t quite cutting it any more. If I thought this was a typical slowdown or correction of some sort, I might be inclined to hang back till the tide turns, but it’s becoming increasingly clear that we’ve got deep structural problems that tax cuts and/or spending cuts simply aren’t going to fix. Neither party has a clue what to do about it, either. Although I will say, frighteningly, the republicans are a little closer to understanding the implications of what’s going on than the Democrats seem to be, it’s just that their “solutions” are self serving policies for the already haves while discarding the have nots to a future of “Would you like curly fries with that?”

The simple fact, as I see it, is that the days of mass employment are ending. Companies will be functioning on 10% or less of the staff they traditionally needed, manufacturing businesses likely less still. That’s a helluva lot of people with no jobs or hope because they are never coming back. With shitty retail jobs being basically the only widely available growth sector, even that’s self-defeating. Eventually, when such a high percentage of the population is getting piss poor wages, they stop buying stuff. Besides, the internet’s kicking brick and mortar retail’s ass. How many fast food jobs can one nation reasonably support?

I bitch a lot about offshoring jobs, and I’m right, I think. It is exploitative, and it has been destructive to our economy. But I’m now realizing that it was going to happen anyway. Those factories will be fully automated in another decade or so, and even the third world workers raking in their 35 cents an hour will be out of work then. This is a problem we would inevitably have had to deal with, even if businesses on a wide scale hadn’t decided to openly screw their own workers for an extra something-something in their stock options years before it was necessary to downsize.

We’ve got an abundance of people with skills and experience nobody wants or needs to pay for any longer. A problem, I might add, that’s going to continue to get worse as technology gets better. Look at health care, for instance. You know why health care is so fucked up? Because we’re continuing to act like the 1950 model  (when you got a job in a company, health insurance was part of the package and you stayed there for 40 or 50 years, before retiring with a nice pension) is even close to relevant any more. People don’t work in companies for five years, let alone fifty any more. And that cuts both ways. Employers who began to treat workers as resources rather than people destroyed the concept of employer-employee trust, and as time went on, they paid less and less, kicked in less and less for insurance, converted the relatively stable pension system into the volatile 401k racket, all so more and more money could go upstairs. You don’t think the people working in these companies saw the effects, first hand, of their bosses reaping giant windfalls while they had to fight to get a 50 cent raise every couple of years? The whole get-a-job/career mantra has become almost totally exploitative to workers, and their loyalty went straight out the window, as well it should have. The natural outgrowth of this is that companies will automate as many jobs as possible, eventually having as few people on the payroll as is feasible.

Yet our entire economy runs on the foundation of getting-a-good-job/career. How the hell are we going to survive if there’s only 1 good job for every 5,000 or 10,000 people looking? That’s the description of a society poised to collapse in on itself. I don’t know about you, but I’m not quite ready to be living out scenes from Mad Max just yet. I still haven’t finished taking the tread off my old tires and tacking it on to some football shoulder pads.

What can save us? Probably the same thing that fucked us up, technology, specifically the internet. What’s the one big rallying cry on the Democratic side? Income inequality. Well, look at what the internet has done to media companies. Established newspapers and music companies got hammered. But look at what else happened. That money that newspaper lost is being spread around to hundreds or thousands of smaller outlets that made nothing before. The top music companies and the highest grossing bands lost ground, but there’s thousands or tens of thousands of smaller bands making money now that made nothing before. Books are heading the same way. As print loses ground, there’s now tens of thousands of writers making money digitally who made nothing before. You want income redistribution? That looks suspiciously like a free market based way to go about it. Can’t call that socialist. Certainly, this process created giants; Google from newspapers, Amazon from books, Apple from music; but giants will always exist. Besides, the old media companies existed as exclusionary forces. Amazon works with anybody selling ebooks, Apple with anybody selling music (and ebooks), Google with anybody producing content. It’s a simplification, true, but these new media companies generally don’t discriminate between giant multinational corporations and individual entrepreneurs. I’d be willing to bet that alone is the principal reason media companies hate the tech giants so much. It’s not that they revolutionized their industries, its that, in doing so, they failed to properly pay tribute to companies who got a little too comfortable perched on their unapproachable golden thrones.

This is just the media industry, too. Eventually, it’ll work across virtually the entire spectrum of commerce, and individual people will have direct access to a virtually unlimited customer base, helped out by tech companies that are happy to take their cut regardless of who’s selling it. My uncle, some twenty years ago now, well before the internet was widespread enough to be genuinely practical, tried his hand at building furniture for a living. This was no picnic table operation, he was a craftsman, making high-end wooden furniture, ornately carved, hand hewn, the best materials, intricate inlays of hand carved objects like crabs (we live on the Chesapeake Bay, after all) or oak leaves perfectly done. This wasn’t cheap IKEA crap.

And that was ultimately his problem. One that turned out to be a fatal one for his business at the time. Building the furniture; the time it took, the materials, etc; required a price above what the market could bear. The number of people around who could afford to drop that kinda coin on a hand crafted dining room suit was too small to attract a large enough customer base to make money. His work was exceptional, some of the best I’ve seen, certainly, but he just couldn’t connect with enough customers who could afford his rates.

Now consider if he had been twenty years later. What kind of access do you think he could get to high-end furniture buyers? How much do you think it would cost him to get that access, something that was quite simply impossible at the time he tried his business. I’m pretty confident he could’ve found more customers. Actually, I wouldn’t be surprised if he ultimately ended up with a waiting list of custom projects, keeping him in steady work, or maybe being able to hire a someone or two to help. The internet levels a lot of traditionally slanted playing fields.

The old ways of mass employment, companies who hired thousands of people at a time are dying off. The new companies coming in aren’t hiring on that scale, and thanks to technology, they never will. We can’t rely on the business community to provide the work we need, no matter how many tax breaks we give them. What we need is to transition from an economy dependent on large companies hiring mass numbers of workers to one where individual people create their own work, their own incomes, likely from multiple smaller sources. There’s never been a better time to be entrepreneurial, either. Modern possibilities are virtually endless, and affordability has opened doors into industries that were unthinkable just a few years ago. We have a society still living in the mass employment model, even though its failing. We need a country of 300 million entrepreneurs instead of 300 million worker bees.

I see two areas where we’re making crucial mistakes, two places where I think government could be useful, for a change. One is not pushing to make broadband internet a utility. Let’s be realistic here, the internet has already become virtually ubiquitous. It’s only going to grow more so as it continues to dominate communication and commerce. Everybody will need access to it and cheaply. Yeah, that means telecomms might take a hit but who among you doesn’t feel just a little exploited by the bills you’ve paid over the years for phones, cable, internet, what have you? Be honest, you know damn well they’re capitalizing on their advantages as much as possible. Considering they operate in a government regulated little monopoly playground, I wouldn’t exactly weep for their loss. Despite the current GOP mantra going around, sometimes things are important enough that for-profit businesses can’t sufficiently handle the task. They have no reason to expand access to outlying areas with few people. There’s no market reason where it makes sense for them to do so. Do we just leave those people in the dark ages? What if we had done that with the electrical grid? Your municipal taxes should cover broadband internet as a utility for all, wireless preferably.

Secondly, we should be expanding the postal service, not defunding it. Look at the direction things are going. How much stuff do people buy online? What happens when most of commerce comes to you rather than you to it? There’s going to be huge demand for delivery services. Sure, UPS and Fed EX would be none too happy, but if government’s role is to create an atmosphere of wide spread opportunity, what harm could possibly come from cheap internet access for all and cheap delivery costs? That sounds like a recipe for retail growth to me, primarily amongst segments who are currently blocked out by high-cost barriers to entry.

Just think, a nation of millions of individual business people, taking advantage of that atmosphere. The established businesses who have locks on the marketplace now will lose some ground, but possibly millions of people will be making money where none was possible in the old economy.

You want income redistribution? Here’s how you do it, you give as wide a swath of regular people the tools to compete in the open market with the big boys and earn that income away. More free and open competition. Some other things will have to change. Health insurance will necessarily have to sold individually instead of in group company rates, yet still be affordable, which it already isn’t even close to now. The tax code will have to be seriously simplified, as well. Can you imagine getting 250 million itemized tax filings from small, individual businesses? How many people essentially just staple their W2 from their one or two jobs to their 1040 EZ and be done with it now? That won’t happen much any longer. We’ll probably end up with some kind of progressive flat tax with higher rates at higher income levels or something like it. Otherwise, the tax preparation industry is set for a serious boom period.

Look, what I’ve talked about here is already happening. Do you really think all these out of work people aren’t finding ways of making a buck here and there to get by? Most of it is unreported cash, no doubt, but people are basically very resourceful creatures. Give everybody the tools and the opportunity and bring this individual resourcefulness out into the light of day.

The time of mass employment at a relative few large companies is ending. What we need is to shift to where the average person is a participant in the market from both sides, not strictly a consumer. The real money is in selling the stuff, or offshoots that assist in the process. Labor in a mass employment world will always get the short end eventually. And the way we’re heading, there won’t be enough of that short end to go around much sooner than later.

This Ain’t Your Grandfather’s Economy

Who’s economy is it, anyway? With all the talk of economic recovery and what course of action we should take to reverse things and bring about a revival in jobs and wages, it seems to me that we’re missing a crucial point.  That being, what kind of economy are we living in?  Is it the traditional type we all know so well, or some new hybrid where financial markets are more important than the actual marketplace?

Read full article on Living With The Apocalypse

Published in: on August 13, 2011 at 8:08 pm  Leave a Comment  
Tags: , , , ,
Follow

Get every new post delivered to your Inbox.

Join 117 other followers

%d bloggers like this: