Wednesday, January 18, 2023

Social production of moral indifference - 5a

"In looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And, if they don't have the first, the other two will kill you." – Warren Buffett

Brainy people can sustain an astonishing degree of emotional and cognitive detachment from reality as shown in, for example,  Empire of Pain. The political and business elite, whether capitalist or communist, has a fierce vested interest in all of us swallowing their stories, even better if it’s supposedly confirmed by ‘science’ and ‘data’. This makes it important to be suspicious of statistics. The same data can be used to support very different views. The main illusion produced by all these figures is that they represent ‘reality’. In the majority of cases, however, they are creating a certain image of reality. 

Darwin and Dawkins seem to have little connection with us as individuals. Unfortunately, this is a dangerous illusion. Take the shocking example of the Enron approach to personnel policy. By all accounts (including his own) Jeff Skilling, its CEO, was a very clever guy, even brilliant. “I am fucking smart,” he told an admissions officer at Harvard Business School. When somebody talks like that, you can be quite sure he will do some dumb things. It was Skilling’s vision and management philosophy that turned what could have been a simple bankruptcy into an epic of corporate greed, fraud, and corruption. 

According to a Businessweek interview, “there was never any question who was in charge. It was Jeff.” His favorite book? The Selfish Gene. (Apparently, Dawkins was horrified to learn that this book inspired Skilling.) Officially, the system that Skilling imposed on Enron was known as the PRC, or Performance Review Committee. But the employees called it “Rank and Yank.” Every year Skilling recruited hundreds of new MBAs from the best business schools, and then fired those whose performance ranked in the lowest 10 percent. Top performers, on the other hand, were lavishly rewarded. 

Skilling thought that the system was great. He told one reporter, “The performance evaluation was the most important thing for forging a new strategy and culture at Enron — it is the glue that holds the company together.” Skilling couldn’t have been more wrong. Enron “was as competitive internally as it was externally.” Traders who needed to go to the bathroom shut down and locked their computers because they were afraid that a colleague (in other words, a competitor) sitting at the next desk, would steal their ideas. 

For all his smartness, Skilling did not realize that humans actually have a natural inclination to work for the mutual benefit of an organization. People like to cooperate and collaborate, and they often work more productively when they have shared goals. Take all of that away and you create a company that will destroy itself. Employees began to focus solely on their own performance at the expense of the firm's overall performance and Enron became a miserable place to work. 

The individual performances of its staff members were continually monitored and contrasted. On the basis of the results, one-fifth of its employees were sacked each year, but not before they had first been publicly humiliated by having their name, photo, and failure posted on the company website. It wasn’t long before total paranoia reigned and almost everyone was falsifying their figures. Skilling completely destroyed any willingness among his employees to cooperate — not with each other, not with their bosses, not with the company itself. And after that, collapse was inevitable.

But that failure is not the end of the story. Although the system that Skilling set up at Enron was an extreme example, the Enron model is still in wide use. This Rank-and-Yank scheme has become general practice at American companies, including such behemoths as Microsoft and General Electric (where it was pioneered by Jack Welch). Rank and yank can go by a few different names - Set distribution, forced ranking, vitality curve, and rank and yank are all alternative ways of saying the same thing - ranking employees by performance and getting rid of the ones at the bottom.

The belief in the brilliant individual, and the corresponding disparagement of team effort underpins the Rank-and-Yank system. According to a 2012 estimate, 60 percent of Fortune 500 firms use what is essentially the Rank-and- Yank system (although giving it more politically correct names). The fall of Enron was just a warning signal. One wonders, in how many other companies has internal cooperation been undermined to the point where they are about to become new Enron's?

HR managers at multinationals are expected to apply the 20/70/10 rule. Twenty out of every hundred employees are the high flyers, seventy provide the critical mass, and ten should be given the boot, even if sufficient profit and growth has been achieved. Googling the search terms ‘Rank and Yank’ and ‘20/70/10 rule’ throws up hundreds of hits of company documents praising this approach, invariably referring to Spencer’s ‘survival of the fittest’ and Dawkins’ ‘selfish gene’. 

The Selfish Gene is, in many ways, a brilliant book. Yet it fails utterly to explain one thing: the evolution of cooperation in human beings. The main idea of The Selfish Gene readily lends itself to abuse by the 'best and brightest' of the world. Selfish people are naturally attracted to theories that say that the human is a selfish beast, that’s the way things are. And I, being the smartest guy around, always knows the best. They find such theories liberating, giving them carte blanche to be selfish and greedy and feel good about it. Peter Turchin says in Ultrasociety:

I am reasonably certain that Richard Dawkins is, and George Williams and Herbert Spencer were, decent human beings, at least to a fair approximation. It is, at any rate, hard to imagine them perpetrating corporate fraud on the massive scale of Jeff Skilling. Nevertheless, their flawed understanding of human nature not only gave them pessimistic views of our capacity for morality, altruism, and cooperation. Worse still, policy prescriptions on how to increase cooperation, trust, and social justice will not achieve the desired results so long as they rest on these views.

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