What do you envision as the alternative to having a job? Running your own business? … Living off of a trust fund?
That list makes a decent starting point.
“Let them eat cake”, thy name is Morendil!
Again, the issue not whether the functions accomplished by a job can be broken down into their consitutent components. Of course they can. But Godin’s claim goes further, into saying that people are fundamentally ignorant of alternate ways to accomplish these functions.
Does he really not think that people are aware that if you have enough money, you don’t need to work to earn an income?
Also, this is another tenuous division of conceptspace:
Another is taking orders, vs giving orders, vs neither. And so on.
Why is one taking orders, while another isn’t? One way or another, you usually have to do something other people want to get their money. Grocery stores are taking my orders to bring them food. Employers are only giving me orders in the sense that, “if you want this money, you will perform this act. If you don’t like that tradeoff, we can go our separate ways.”
The identification of employment as “taking orders” is hardly a natural category for it, and certainly not one people are ignorant for not making.
Most work boils down to solving some problem or another. An employee solves problems within the constraints imposed by their company. An entrepreneur solves problems within the constraints imposed by their customers. The former are really just an indirect representation of the latter.
From a different angle, an employer solves a set of problems for employees—smoothing out the income stream, and doing a bunch of logistical details associated with finding work, having what’s needed to do the work, and getting paid. This is apparently so valuable that free-lancers get paid between 2 and 3 times as much per hour as employees.
This is a seductive explanation, but competing hypotheses exist, for instance Coase’s, which states that firms, as a phenomenon, arise due to the transaction costs incurred when hiring on an open market a freelancer to perform a job you need.
If there is an economic advantage to reducing these transaction costs by having the job performed “internally”, and this advantage overcomes the intrinsic costs of keeping the job internal, firms will tend to form, and grow larger as the discrepancy between these costs.
So here, rather than “employees choose to work in firms” we have an explanation of the form “firms have an interest in acquiring employees”, and no particular reason to expect that the formation of firms benefits employees.
What evidence (as opposed to just-so stories) can we find for or against each of these hypotheses?
I was offering a different angle, not saying that employment can be fully explained either by employer or employee motivations.
There are circumstances where a government forces matters in one direction or the other. In Slavery by Another Name, it’s explained that after the Civil War, there were laws requiring black people to get permission from their employers to get a job with someone else, and also vagrancy laws against being unemployed.
On the employee’s side, there can be laws (France, the Soviet Union) or customary contracts (tenure) which make it impossible or almost impossible to fire them.
In general, I’d frame it as employees and employers are hoping that the other will solve problems for them, and the hope is frequently more or less realized.
I am very surprised that you see Ronald’s explanation in contrast to Nancy’s. Income-smoothing is the only example she gives that does not look to me like a transaction cost. I think the economics party line is that the transaction costs will be split between the employee and the firm, with agnosticism about who will get the bulk of the benefit.
The following is only a sketch of the complete argument since that would take pages to write and time I don’t have.
The most basic law of economics is that prices are determined by supply and demand. An entrepreneur naturally chooses to provide goods or services to a market niche where a high potential demand faces a low supply so that he can sell his goods/services at high prices. An employee on the other hand imposes on himself a limit of one customer. He artificially limits his market and thereby reduces the price he can get for his skills. Although he can potentially quit his job and work for someone else this is associated with additional transaction costs in comparison to self employment. That the company indirectly markets the employee’s skills to a larger market does not alleviate this price reduction since it’s not the companies interest to maximize employee’s salaries.
So why would anybody choose employment over self employment? It is because most people lack the fundamental skill to market their own skills and a market of one customer is still better than zero. The important question now is why people lack this skill. That is a complex thing, but one factor is that our culture does not encourage risk taking, sales talk and other important entrepreneurial skills. There is still a strong bias of preferring a “honest worker” over a “capitalist pig” which simply prevents most people from developing their marketing skills.
And that is what is meant by the original quote. Imagination is based on culture and our culture cripples people’s potential to imagine what it would be like if they were entrepreneurs instead of workers.
The most basic law of economics is that prices are determined by supply and demand.
Another basic law of economics is that wealth can be created by specialization.
An employee on the other hand imposes on himself a limit of one customer. He artificially limits his market and thereby reduces the price he can get for his skills.
A firm dealing exclusively in government contracts, on the other hand, imposes on itself a limit of one customer. It artificially limits its market and thereby… ?
So why would anybody choose employment over self employment? It is because most people lack the fundamental skill to market their own skills and a market of one customer is still better than zero.
So why would anyone hire a programmer instead of just writing the code themselves? It is because most lack the fundamental skill of crystallizing their requirements into machine-readable form. The important question now is why people lack this skill.
I think I get it now. There seems to be a confusion about what specialization means. It means specializing in the service you provide, not in the customers you provide it to. Market segmentation is only a tool to identify how to specialize your service. But no sane company would refuse to deliver to a paying customer simply because he doesn’t fit into their target audience.
And there is a difference between computer programming and basic marketing. The former is a specific skill with a smaller area of application while the latter is a very general skill, and what is more one that stems from a basic human trait, namely the formation of relationships. Of course, not everybody needs specific marketing knowledge as taught in business administration.
Finally, I’m not arguing against working for a single employer in general. Quite the contrary. When you’re relatively new to your field of work you almost certainly lack the experience to be a successful entrepreneur and should first learn the trade under the relative security of employment. What I am arguing is, that if a huge number of people do not gain the confidence from experience to form their own idea of the service they want to provide and market it to a relevant audience something seems to be wrong, because taking responsibility for your life and forming relationships is an essential part of growing up.
“Let them eat cake”, thy name is Morendil!
Again, the issue not whether the functions accomplished by a job can be broken down into their consitutent components. Of course they can. But Godin’s claim goes further, into saying that people are fundamentally ignorant of alternate ways to accomplish these functions.
Does he really not think that people are aware that if you have enough money, you don’t need to work to earn an income?
Also, this is another tenuous division of conceptspace:
Why is one taking orders, while another isn’t? One way or another, you usually have to do something other people want to get their money. Grocery stores are taking my orders to bring them food. Employers are only giving me orders in the sense that, “if you want this money, you will perform this act. If you don’t like that tradeoff, we can go our separate ways.”
The identification of employment as “taking orders” is hardly a natural category for it, and certainly not one people are ignorant for not making.
Upvoted with gusto.
Most work boils down to solving some problem or another. An employee solves problems within the constraints imposed by their company. An entrepreneur solves problems within the constraints imposed by their customers. The former are really just an indirect representation of the latter.
From a different angle, an employer solves a set of problems for employees—smoothing out the income stream, and doing a bunch of logistical details associated with finding work, having what’s needed to do the work, and getting paid. This is apparently so valuable that free-lancers get paid between 2 and 3 times as much per hour as employees.
This is a seductive explanation, but competing hypotheses exist, for instance Coase’s, which states that firms, as a phenomenon, arise due to the transaction costs incurred when hiring on an open market a freelancer to perform a job you need.
If there is an economic advantage to reducing these transaction costs by having the job performed “internally”, and this advantage overcomes the intrinsic costs of keeping the job internal, firms will tend to form, and grow larger as the discrepancy between these costs.
So here, rather than “employees choose to work in firms” we have an explanation of the form “firms have an interest in acquiring employees”, and no particular reason to expect that the formation of firms benefits employees.
What evidence (as opposed to just-so stories) can we find for or against each of these hypotheses?
I was offering a different angle, not saying that employment can be fully explained either by employer or employee motivations.
There are circumstances where a government forces matters in one direction or the other. In Slavery by Another Name, it’s explained that after the Civil War, there were laws requiring black people to get permission from their employers to get a job with someone else, and also vagrancy laws against being unemployed.
On the employee’s side, there can be laws (France, the Soviet Union) or customary contracts (tenure) which make it impossible or almost impossible to fire them.
In general, I’d frame it as employees and employers are hoping that the other will solve problems for them, and the hope is frequently more or less realized.
I am very surprised that you see Ronald’s explanation in contrast to Nancy’s. Income-smoothing is the only example she gives that does not look to me like a transaction cost. I think the economics party line is that the transaction costs will be split between the employee and the firm, with agnosticism about who will get the bulk of the benefit.
The following is only a sketch of the complete argument since that would take pages to write and time I don’t have.
The most basic law of economics is that prices are determined by supply and demand. An entrepreneur naturally chooses to provide goods or services to a market niche where a high potential demand faces a low supply so that he can sell his goods/services at high prices. An employee on the other hand imposes on himself a limit of one customer. He artificially limits his market and thereby reduces the price he can get for his skills. Although he can potentially quit his job and work for someone else this is associated with additional transaction costs in comparison to self employment. That the company indirectly markets the employee’s skills to a larger market does not alleviate this price reduction since it’s not the companies interest to maximize employee’s salaries.
So why would anybody choose employment over self employment? It is because most people lack the fundamental skill to market their own skills and a market of one customer is still better than zero. The important question now is why people lack this skill. That is a complex thing, but one factor is that our culture does not encourage risk taking, sales talk and other important entrepreneurial skills. There is still a strong bias of preferring a “honest worker” over a “capitalist pig” which simply prevents most people from developing their marketing skills.
And that is what is meant by the original quote. Imagination is based on culture and our culture cripples people’s potential to imagine what it would be like if they were entrepreneurs instead of workers.
Another basic law of economics is that wealth can be created by specialization.
A firm dealing exclusively in government contracts, on the other hand, imposes on itself a limit of one customer. It artificially limits its market and thereby… ?
So why would anyone hire a programmer instead of just writing the code themselves? It is because most lack the fundamental skill of crystallizing their requirements into machine-readable form. The important question now is why people lack this skill.
I fail to see your point.
I think I get it now. There seems to be a confusion about what specialization means. It means specializing in the service you provide, not in the customers you provide it to. Market segmentation is only a tool to identify how to specialize your service. But no sane company would refuse to deliver to a paying customer simply because he doesn’t fit into their target audience.
And there is a difference between computer programming and basic marketing. The former is a specific skill with a smaller area of application while the latter is a very general skill, and what is more one that stems from a basic human trait, namely the formation of relationships. Of course, not everybody needs specific marketing knowledge as taught in business administration.
Finally, I’m not arguing against working for a single employer in general. Quite the contrary. When you’re relatively new to your field of work you almost certainly lack the experience to be a successful entrepreneur and should first learn the trade under the relative security of employment. What I am arguing is, that if a huge number of people do not gain the confidence from experience to form their own idea of the service they want to provide and market it to a relevant audience something seems to be wrong, because taking responsibility for your life and forming relationships is an essential part of growing up.