Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity (10 page)

Plants grow, people grow, even whole forests, jungles, and coral reefs grow—but eventually, they stop. This doesn’t mean they’re dead. They’ve simply reached a level of maturity where health is no longer about getting bigger but about sustaining vitality. There may be a turnover of cells, organisms, and even entire species, but the whole system learns to maintain itself over time, without the obligation to grow.

Companies deserve to work this way as well. They should be allowed to get to an appropriate size and then stay there, or even get smaller if the marketplace changes for a while. But in the current business landscape, that’s just not permitted. Corporations in particular are duty bound to grow by any means necessary. For Coke, Pepsi, Exxon, and Citibank, there’s no such thing as “big enough”; every aspect of their operations is geared toward meeting new growth targets perpetually. That’s because, like a shark that must move in order to breathe, corporations must grow in order to survive. This requirement is in their very DNA or, better, the code we programmed into them when we invented them. Seeing how that
was close to a thousand years ago, corporations have had a pretty long and successful run as the dominant business entity.

The economy we’re operating in today may have been built to serve corporations, but not many of them are doing too well in the digital environment. Even the apparent winners are actually operating on borrowed time and, perhaps more to the point, borrowed money. Neither digital technology nor the corporation itself is necessarily to blame for the current predicament. Rather, it’s the way the rules of corporatism, written hundreds of years ago, mesh with the rules of digital platforms we’re writing today. A corporation is just a set of rules, and so is software. It’s all code, and it doesn’t care about people, our priorities, or our future unless we bother to program those concerns into it.

That’s why it’s useful—particularly in a rapidly changing media environment—to look at corporations as if they were forms of media: programs, written by people at a particular moment in history in order to accomplish specific goals. Once we have a handle on the corporate program, we’ll have a much easier time understanding what happened when we plugged it into the digital economy, as well as what to do about it.

Marshall McLuhan, the godfather of media theory, liked to evaluate any medium or technology by asking four related questions about it.
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The “tetrad,” as he called it—really an updated version of Aristotle’s four “causes”—went like this:

What does the medium enhance or amplify?

What does the medium make obsolete?

What does the medium retrieve that had been obsolesced earlier?

What does the medium “flip into” when pushed to the extreme?

It sounds trickier than it is. The automobile, for example, amplified speed. What did it make obsolete? The horse and buggy. It retrieved the values of knighthood—the sort of jousting and machismo we see in everything from drag races to NASCAR. And when pushed to the extreme, it
actually leads to traffic jams, working against the whole point of cars to begin with. Or take the cell phone: It amplifies our mobility and freedom. It makes landlines obsolete. It retrieves conversation. And flipped to the extreme, it becomes a new kind of leash, making us constantly available and accountable to everyone.

The best part about looking at the corporation as a technology or medium is that, in the process, we remind ourselves that it didn’t just emerge as a natural phenomenon. It’s not as if businesses were getting so big that they evolved a corporate structure in order to keep growing properly. Quite the contrary: the corporation was invented by monarchs to stem the tide of a burgeoning middle class and its thriving new marketplace and usurp the growth they were enjoying. The fact that corporations were
invented
should alone empower us to
re
invent them to our liking.

So, then, what were corporations invented to amplify? The power of shareholders and the primacy of their capital. Feudal lords, who had lived off the labor of peasants for centuries, were getting poorer as the people began to make and trade goods with one another. The aristocracy needed a way to preserve their wealth and position in an increasingly free market. So they invented the chartered monopoly—a piece of paper with a list of rules—through which a king could grant exclusive dominion over an industry to his favorite merchant. In return, the king and other aristocrats got the right to invest in the enterprise. This way, they could use their wealth alone to make more money. Did the merchant need investors? For the most part, no.
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But he made this concession in order to get the king’s charter and protection. The investors were like shareholders, and the merchant was like the CEO. Except these shareholders were also the ones writing the laws of the land.

What did corporations render obsolete? They killed the local bazaar
and all the peer-to-peer value creation and exchange that took place there.
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They also worked against the marketplace’s values of innovation and competition. If a company won the exclusive right to make clothing or to exploit the riches of the East Indies, then its only job was to extract value. It had no competition and no reason to innovate. We have to remember this part of the program because it’s so counterintuitive: the core code of the corporate charter is to repress exchange, competition, and innovation. It was intended to extinguish the free market.

The third part of the tetrad, retrieval, is a tricky notion. It usually has a lot to do with cultural values—something from the deep past that gets rediscovered in a new form. Corporatism, by enhancing the power of the king and his ability to conduct great global enterprises, retrieved the values of empire. That’s how we got the Renaissance—quite literally, the “re-nascence” or “rebirth” of the values of ancient Greece and Rome. This time around, instead of the Holy Roman Empire, we got colonialism. The colonial powers reduced places to territories and people to human resources from which to extract labor. Local values had to give way to those of the chartered corporations and the gunships protecting them.

With the power to write the laws of the territories in which they operated, corporations did very well for themselves. So, for instance, when the Dutch East India Company began harvesting cane, local islanders supplied it with rope. This became a profitable new industry for the indigenous population. The corporation, behaving true to its programming, sought to stamp out this local value creation. It requested, and won, a new law from the king outlawing rope manufacture in the East Indies by anyone but the chartered monopoly. From then on, anyone wanting to make rope had to do it as a worker or slave of the company.
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Likewise, in the American colonies, farmers were prohibited from selling their cotton locally. By law, all of their harvest had to be sold to the British East India Company at a fixed price. It was then shipped to England, where it was fabricated into garments by another chartered monopoly, and then shipped back to America for sale to the colonists. This was not more efficient; it was simply more extractive. The American
Revolution was fought as much against the mother company as the mother country.
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Finally, as the fourth part of the tetrad asks, what happens when the corporation is pushed to the extreme? What does it “flip into”? You’ve probably guessed this one already: a person. Even though the corporation and the industrial landscape may have worked to remove human beings from the value equation, there’s nothing corporations strove for more consistently than to earn the rights and privileges of people. That’s the basis of the recent Hobby Lobby case before the Supreme Court, which decided that a corporation’s personhood entitles it to deny aspects of a health plan with which it morally disagrees.
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It’s also the driving force behind the Citizens United case, in which corporations were granted the right to free speech formerly reserved for humans—but not the corresponding limitations on campaign donations. And these cases all trace back to the most hard-fought battle of all, won during Lincoln’s era, of corporate “personhood” itself.
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The objective, true to the corporation’s three other core commands, was to give railway corporations the same rights to land as that of its local human inhabitants. This way, people would no longer be able to object to railways’ seeking right of passage through their towns or property.

Of course, the corporation becomes a person only so its primary benefactor—the investor—doesn’t have to have any actual human skin in the game. The object here is for the investor, originally the king but now the shareholder, to be able to make money
with
his money. Instead of working or creating value, the investor provides capital to someone else—not a human being but a corporation—to go out and bring back returns. Further benefiting investors, the corporation accepts liability when something goes wrong. The investors’ liability is limited to whatever they paid for their stock. They get to keep whatever dividends they may already have drawn or profits from the shares they have already sold. (That’s where the notion of an LLC, or limited liability company, comes from.)

The function of the corporate “medium” today begins to make sense if we understand it as an expression of this original programming. This forgotten code still drives corporate behavior, angering critics and
frustrating corporate boards alike. But the corporation has no choice other than to exercise the four sides of its original tetrad: extract value, squash local peer-to-peer markets, expand the empire, and seek personhood—all in order to grow pots of money, or capital.

The most successful and most loathed corporations of the last century all work this way. Walmart, for one ready example, lives by the tetrad. It extracts value from local communities, replacing their peer-to-peer economies with a single, one-way distribution point for foreign goods. Workers are paid less than they earned in their previous jobs or businesses and are often limited to part-time employment so the company can externalize the cost of health care and other benefits to local government. (Poverty rates and welfare expenses go up in regions where Walmart operates.) Understood as a medium, it amplifies the power of capital by extracting both value from labor and cash from consumers, and bringing it up and out from communities to distant shareholders.

Walmart obsolesces local trade. When it moves into a new region, it undercuts the prices of local merchants—often taking a loss on sales of locally available goods simply to put smaller merchants out of business. Even when it is not practicing predatory pricing, it can survive on lower margins by underpaying its workers and leveraging its size for discounts from its suppliers. In the long run, the store costs its consumers more in lost earnings, unemployment, a decreased local tax base, and externalized costs such as roads and pollution than it saves them in low prices.

Walmart retrieves the values of empire, where expansion is the primary aim. It has opened as many as one store a day in the United States alone.
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The company sometimes opens two stores, ten or twenty miles apart in a new region, and keeps them both open until local merchants go out of business and new consumer patterns are established. Then it closes the less popular store, forcing those consumers to travel to the other one. In the fashion of a Roman territorial war, the advancing armies leave behind only what is necessary to maintain the region.

Finally, in its flip toward personhood, Walmart has attempted to accomplish all this with a human face—quite literally. The company
adopted a version of the iconic 1970s yellow smiley face as a brand personality that the company dubbed Mr. Smiley.
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Pressed to the near breaking point by anticorporate activists and an aggressive media, the company recently hired corporate-identity-makeover firm Lippincott to humanize its values and mission. Walmart’s motto went from the utilitarian and immortal “Always Low Prices” to the much more humanistic “Save Money. Live Better.” In the words of Lippincott, this “emphasizes Walmart’s famous low prices while shifting the focus beyond price to the emotional benefits of shopping at Walmart. Saving money is just the beginning—with those savings, Walmart helps customers live a better life.”
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The new logo, an asterisk dubbed “the spark,” is meant to evoke the twinkle of human ingenuity living within the brand itself. Walmart is alive.

Like the rest of corporate expansionism, Walmart is a success story—at least until its growth strategy reaches its limits. Thanks to the availability of new markets in China, the company might still be growing—but its stores are ultimately an extractive and not a contributive economic mechanism, taking value from the regions it conquers. Local wealth creation and exchange diminishes wherever the company’s model is successfully operating.
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It has to. The job of the company is to extract value from local communities and pay it up to investors. Its customer base, as well as its employee population, ultimately grows poorer.

It’s not as if the company or its board has a choice. It must respect the wishes of its shareholders—which is growth. Walmart’s main competitor, Costco, pays its workers more, hires them as full-time employees, and offers better benefits. This leads to greater employee retention, higher-skilled workers, better customer service, and arguably more favorable long-term earnings and market defensibility. Yet for years Wall Street has punished the company for violating the traditional corporate program regarding labor and has paid lower multiples for Costco’s stock than for Walmart’s.
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Still, like Walmart, the majority of big corporations are playing a game with diminishing returns. You can extract value from a region or market segment for only so long before it has nothing left to pay with. Extractive economics is a bit like draining an aquifer faster than it can replenish itself. Yes, you end up with all the water—but after a while there’s no more left to take.