Here is an essay Sam Palmisano wrote to the Fincial Times. And below is my response. But quickly, it’s an interesting essay on Globalization, and the direction it will, should, and is taking. I admit that I come to read this essay with a bit of skepticisim I reserve for anyone in a post of power – especially those in the corporate power posts as this seems to be our new government, which seriously irks me, for lack of a better verb.
Multinationals have been superceded – by what?
A response to a letter to the editor of the Financial Times by Samuel Palmisano – 12 June 2006 (page 19)
Through out Palmisano’s essay, there are generalizations with evidence to support the opposite of his claims. Chief among them are the idea that the new Multinational Corporation holds the salvation for human society and the world. What is not explicitly stated is that the Multinational is the new government, but that is implied over and over again. Overall, Palmisano obviously has nothing but contempt for Democracy, evidenced by statements like, “People may ultimately elect governments that impose strict regulations on trade or labour…” It is very clear from the outset that his intentions are to thwart the many in the population that can’t exert the control that the Multinationals can. Further, his thinking shows a clear disdain for any allegiance to one’s nation.
Nowhere in his essay does he state the ultimate goal of business. He identifies factors that can lead to the success of this unstated goal. He finds obstacles to be overcome for the success of this goal. Yet not once does he state that his goal is the pooling of resources from the many for the use of the few. His essay assumes the axiom that profit is the ultimate good. Until the SEC requires IBM to state in its various filings, the Social Profit, the Heath & Ageing profit, the Education Profits, the profits that business feels they have no need for, and their losses for that matter, until that time, Palmisano is the same as the Multinationals he claims to have superceded. A rose is a rose by any other name.
Let’s look at the 20th century Business Model – Move production of goods and resources to unregulated cheap labor markets, keep decision makers in the community of the target market. His example of IBM building plants and “established local workforce policies” abroad, while keeping R&D at home is caused, in his thinking, by “…the rise of protectionism and nationalism that began with the first world war….” But these new plants were located not to overcome “nationalism” or “protectionism”, but to take advantage of a cheap resource to produce a valuable resource. This is text book business – lowering costs thereby increasing profits. Unless his new “Globally Integrated Enterprise” intends to not follow that rule, his “new beast” is no different than the “Multinational model”.
One can hardly argue that a model changes if the motivation for its existence is unchanged. Palmisano rightly argues that “…nations and companies must invest in educational and training programes….” to ensure their success. However, what good is the education if it is so directed that innovation is stifled and the company line is towed? What would IBM teach that McDonald’s wouldn’t, and what would they have in common? Would they invest in education without a hand in the policy directions it will take? How would IBM treat the history of its own Nazi collaboration, or explain the importance of poetry in culture? Are the lessons for IBM’s children limited to binary understanding, or will they learn to grapple with complex and divergent ideas that will face them in his new world? And, further, will IBM teach the old adage, “build a better mouse trap and the world will beat a path to your door”? Will IBM raise the children that will unseat the old IBM through competition? If their motivation is still the classic text book motivation without any new metrics that force their motivation to change, their beast is the same. They must now look to address issues that are not limited to the realm of accountants. If this is to be a new beast, they must measure their success in: increasing life expectancy, the overall health of the world, the literacy rates, decreasing their impact on the environment. In short, they must start doing the job of the government. But for that to happen, they much find new motives. No government can be successful if the people it is entrusted with find themselves second to a contradictory notion of success. In the immortal words of The Who, “the new boss is the same as the old boss”.
The argument that skilled labor acquisition is a new challenge for the Multinational is plain wrong. This has been a challenge since the inception of commerce. Finding the best black smith was as difficult as finding the best programmer is. The difference is only that the old skills were physical and the new skills mental. When Ford could train people in Asia to make cars, and the infrastructure supported it, Ford moved those operations to Asia. When IBM could get people trained in programming in India, it began moving the operations that require programmers. The motivation wasn’t to help improve India’s healthcare system or to raise the level of its educational system, nor were there any considerations for the environment or any of “the myriad other challenges that globalization raises”– the motivation was to acquire low cost skills to get larger profit margins.
He also argues trust is a new challenge for the Multinational. Again, plain wrong. Trust is a challenge for any organization. It has always been and always will be. But that aside, he suggests that there needs to be new ways to establish trust. Confusing as that is, there is only one way to establish trust, and that is to be trustworthy. Do what you say you will do. But here again, are empty words as evidenced by Palmisano’s own leadership where he has destroyed retirement plans, healthcare and any other social responsibility IBM had promised its own employees. He talks about privacy and security, yet its IBM’s systems that are used by clandestine spy agencies to watch over their populations and other nations. Can we trust that IBM is keeping our privacy in mind while helping to organize data on countries’ private citizens so it is easy to identify those that might disagree with policies? What we can trust is that IBM is still just a multinational with profits ahead of everything else, including privacy, security and quality.
To use Palmisano’s own phrase, properly understood, the globally integrated enterprise is the same as the old multinational corporation. Sadly, there’s not even a new paint job or anything else to decorate it, just the insistent words of another snake oil salesmen telling us things will be better with his elixir.