Welcome to my website. I’m going to write funny things about serious topics. Or serious things about funny topics. Often both, at the same time.
This blog is for business leaders, or those who work for them. In other words, everyone. Unless you’re retired or something, in which case you probably have much better things to do than read a blog anyway, like tending your garden, napping in the middle of the day, and drinking margaritas straight from the pitcher.
I just completed my MBA and learned a lot of great stuff about how to Administer Businesses. (That’s the A and B in MBA, respectively. Not sure what the M stands for, maybe Magical? I hope it’s Magical.) What I was surprised not to learn was anything about how to manage people. This seemed a huge oversight, considering people are a company’s most important asset. You can have the best invention in the world (example: ShamWow) and without people to make it and sell it (read: Vince from ShamWow) you’re going nowhere.
Time and again our coursework relied on increasing something called “Shareholder Value,” or stock price. This makes sense because in an educational setting, instructors need a criteria in order to gauge progress and assign a grade. Stock price is a quantifiable measure of success, and both students and teachers can see whether the concepts in class are being internalized. It also helps prepare business students for our eventual roles as CEOs and Business Dominators. CEOs of public companies are approved by a board of directors, which typically includes shareholders. Since shareholders decide who the CEO is, the CEO’s biggest motivation is to keep them happy and therefore keep their job. Keeping them happy means increasing the value of their investments in the company. Learning how to do that is important if you’re going to be a CEO someday, which many of us hope to be.
But there is a flip side to every coin (unless you’re using a trick coin, which I’m pretty sure some of you are). Increasing shareholder value means trade-offs with negative consequences. For instance, increasing shareholder value in the short term can be relatively easy when focusing on the short-term. An acquisition of another company can create a jump in value and everyone cheers and thinks you’re a genius, even if rapid expansion without the infrastructure will eventually sink the entire company. (WaMu, I’m looking at you.) Because CEOs rarely last two years it’s too easy take the praise and allow the fallout to be someone else’s problem.
Of course our wizened professors warned us against this, but it’s difficult to internalize that lesson when we’re given months-long simulations that are graded entirely on our ability to increase shareholder value. The upshot was that many of us created companies that would skyrocket through the 8 Rounds in the simulation, knowing full well that the companies would implode in a real-world Round 9. It’s more than a little scary to think that three months later, these same students are sitting in boardrooms as management consultants, advising others on how to run their businesses. Sure, we know what not to do, but we never really got to practice how to do it correctly.
The secondary fallout of this type of leadership is societal, and that’s what really gets to me.
Companies with Shareholder Value as their only focus start to ignore other things, like treating people like human beings. The story about WaMu’s demise is a personal one–my husband was laid off from Washington Mutual. TWICE. The ensuing fallout of the banking crisis led to the two of us being laid off NINE TIMES. We had two babies during this time because we’re super great at timing, but Paul had a great career when we started and we had no reason to think it was in jeopardy. Our oldest was born in 2007. Our next in August 2008. The day she was born the market crashed so hard that we lost $40k in our retirement fund, essentially wiping it out. I had post-partum depression and anxiety so severe that I couldn’t even imagine going to work for about two years. I was hospitalized twice–no health insurance, by the way, leaving us tens of thousands of dollars in debt. We managed our money carefully and had no debt when the first guillotine fell. We were forced to live off credit to make ends meet, using it for things like food and rent. Soon, our cards were maxed.
When all was said and done, our 4-person family had no choice but to leave Hawaii–where we’d lived for seven years, having both children born there–and move to a rural area in Washington to live with my mom. Because we couldn’t afford to have our belongings shipped to the mainland, we lost everything. What we took with us fit into 8 boxes, which were mainly old photos, important paperwork, and a few mementos.
This isn’t a Woe Is Me blog about how hard my life has been. It was a difficult period in an otherwise good life, and we’ve bounced back. I tell it to illustrate the massive impact irresponsible business decisions can have on a single life. There are hundreds of thousands more with stories even worse than mine. The hubris of a few can have huge repercussions which, I fear, no one bothers to think about.
During class discussions, if the topic of cutting costs came up there were always a few classmates quick to suggest lay-offs. Or adding more to the workload of each worker without raising their pay. Or eliminating benefits. In the real world, businesses cut costs by refusing to air-condition warehouses in 110 degree weather, and refusing maternity leave for biological babies born through a surrogate. Less extreme yet more common examples are the recent trend of slashing employees’ hours to avoid offering benefits, and not giving a crap about the environment. If you think of these from a human standpoint they’re horrible. Yet on paper, they improve the bottom line. Desperate to keep their jobs (read: salaries) and be seen as successful, decisions like these are made every day.
The inciting example for this blog was the recent 5,000% price hike of Turing Pharmaceutical’s Daraprim. The CEO of the company came out to defend his decision precisely the way every business school teaches him to. First, we learned, without comment, that the price of medicine is almost completely inelastic. This means, essentially, that people have no choice but to buy it, meaning you can price it as high as you want. One of my pricing classes held a discussion on this idea, and I was the only person in the class to suggest that just because you CAN raise your prices, doesn’t mean you SHOULD. (This answer earned me a C on my final exam. I was supposed to say that Uber’s Surge Pricing was absolutely brilliant. Instead I said it was taking advantage of people and pricing the low-wage-earners out of basic needs like transportation. I also used the phrase “Suck it, rich people!” so that C grade is on me.)
The CEO of Turing also argued that there would be no way to perform more R&D to generate new important drugs without making a profit on the old ones. This may be true–I haven’t seen his financials–but there’s profit and there’s price-gauging. He’s doing the second.
Luckily the world agreed, and even Trump called him a Spoiled Brat, which is the precise moment I saw a pig fly by because I agreed with him. Still, this is far from the only example of social irresponsibility in business, and it certainly won’t be the last. The sad part is that almost no one is talking about this. As the dissenting opinion in my business classes other students were polite but dismissive, even when professors supported what I said. My way didn’t earn them an A or a chance at the C-Suite. My way was earnest but naive. My way didn’t always earn them piles of money, which is ultimately what we were all there for. Taking care of people, society, and our planet, was someone else’s problem. All moral dilemmas could be wrapped in capitalist arguments that on paper seem correct, and go like this: this earns us more money, and earning more money is good for the economy, creates jobs, and helps us invent better products to help consumers.
True. On paper.
In real life our kids are puking on our only pair of jeans, and a pregnant woman in Africa with an infection can’t afford her medicine.