Thread by @asymmetricinfo

All right, folks, in a shocking turn of events that stunned the world, I got my column in early today, and at length. Thus, I have time for the tweetstorms burning holes in my pocket.

Let's start with Elizabeth Warren's "workplace democracy" plan: washingtonpost.com/opinions/ameri…

So first of all, you should go read this excellent piece by @hamandcheese on the problems with it, which touches on things I didn't have space for: like the tendency of workers to be extremely risk averse, prioritizing stability over innovation.

Sorry, link here: nationalreview.com/2018/08/elizab…

"Move fast and break things" has two characteristics: it's really unpleasant for the folks in the sector designated for breakage, and it's also why we are all hanging out on twitter instead of hand-looming our next shirt.

Shareholders have a big stake in the upside. Workers, on the other hand, hold a quite different form of capital: the skills they have painstakingly accumulated over decades. They are going to resist anything that devalues their stock of capital. Which means: change.

They will do this even in a country with a good safety net, because people like having a job more than they like having generous unemployment benefits. Most of us aren't sociopaths. We like feeling that we're making a contribution to earn our bread.

Yes, preventing disruptive innovation is in some sense no different from having a makework job. By the same token, NIMBYism is in some sense no different from demanding that renters transfer you a substantial sum every month. But both offer you plausible deniability.

Now, of course, we could have a fascinating philosophical discussion about whether we *should* prize innovation over stability, but before we do that, we should recognize that there is a tradeoff. Also, we should probably recognize that America is especially good at innovation

And this matters, not just for us, because we're so big, and produce a disproportionate share of the world's innovation. We play a substantial role in setting the technology frontier that the rest of the world then catches up to.

To be clear, I'm not arguing something dumb like "no one but us innovates". But we punch out of our weight class--and we're already in the heaviest weight class. So it matters more whether we have a pro-innovation market structure or not.

(This is also, btw, an argument for free-flowing high-skilled immigration which lets innovators move here and figure out how to make everyone richer. But that's an argument for another day.)

Onwards. To those who asked "When you say that American labor relations are uniquely adversarial, why didn't you discuss the role management played in making them that way?", two answers.

For one thing, I'm not claiming they're uniquely bad. The history of UK labor relations is terrible! France isn't so hot either! And don't get me started on the Belgians ... in fact, really good labor relations are a feature of Germanic countries. Why, I have no idea.

You can say "social trust", but German social trust isn't all that special, having gotten double-sacked in the twentieth century by Nazism, and then Stalinism. Maybe it's institutional. Dunno. But there you are.

As for the history--I did, in fact, reference it, but trimmed so tightly for space that many may not have caught the reference: the "contentious and often violent" process of unionization.

To be clear: a lot of that (not all of it, by any means, but a lot) is on management.

If you shoot your workers to prevent them from unionizing, you're not going to have a very good relationship with the union once they organize your concern over your violent obstruction. And--quel surprise!--industries where things like that happened don't.

Looking at the history of the auto industry, I'm not sure a start like that is fixable. I mean, the BIg Three actually tried to build plants with collaborative rather than adversarial cultures--Saturn, the NUMMI joint venture with Toyota. The unions eventually killed them.

It's not super-clear why, except that the institutional culture of hte union was, by that point, bound up in an adversarial relationship. There's a great anecdote from the 1980s Chrysler turnaround where some sort of co-determination is proposed, and the union *turns it down*.

It's like a bad marriage: at some point, it doesn't matter who started it, because neither party can fix it. That's American labor relations in a lot of places. That's going to shape what co-determination looks like here, for good or for ill. Probably mostly for ill.

Finally, a number of folks took issue with the anecdote I told where GM's union just refused to believe they were running out of cash until a few weeks before they actually ran out of cash.

Some wanted to know where I got this. Answer: from a source close to the negotiations when I was reporting on the GM bankruptcy.

Others said "Well, if they'd had co-determination, they would have been on the board, and seen the financial statements, and understood what was happening."

Folks, they had financial statements. GM filed them every three months with the SEC. They showed GM burnign $1 bb a month.

The union either couldn't do very simple math, or figured that management was lying in order to screw them out of concessions.

People who run unions generally know how to subtract.

Why did they believe management was just making this up? Well, on one level, this was crazy. On the other hand, they had decades of adversarial negotiations proving that management would say whatever it could get away with to win concessions. The relationship was just poisonous.

One notable thing to remember is that union leadership skews old, and membership sometimes skews even older, b/c of retirees. So it doesn't necessarily do the firm much good to turn around and start playing nice, because the power is held by folks who remember you 20 years ago.

Anyway, we can sit around all day trying to allocate blame, and if that seems like an interesting exercise to you, follow your bliss. But don't confuse fixing the blame with fixing the problem.

Co-determination will have to work with the firm cultures we have, not the ones we think we deserve, or the ones we might have had if management hadn't acted like jerks 50 years ago.

And with that, another tweetstorm endeth. You can read the column here: washingtonpost.com/opinions/ameri…