The future of the corporation
Is the future of work lie in short-term employment, part-time, and contracting for most people? Let’s take a look at what being an employee means, and think why they exist in the large, well-paid, numbers they do today. Hint, it’s not because of the milk of human kindness.
The modern employee has diverse predecessors. These span a very wide range: think nomadism vs serfdom vs sole-proprietor farmers.
Likewise, many alternatives to employment already exist: self-employment, salary, ownership etc. What determines how we work? The answer is Institutions and efficiency.
One of the most brilliant inventions of the 1800s was the corporation. This was a set of legal and cultural laws and norms that allowed people to work together. The value of the corporation is far from clear: Why would it be more efficient to create new responsibilities and added coordination burdens, instead of the individual players coordinating themselves in the market? The answer was, perhaps surprisingly, that corporations win in free competition. The also have emplyees. Indeed, they create the possibility of employment, as opposed to contracting.
Because of this intimate link to the corporation, a shift away from employment would likely require a decline in the corporation itself. To-date, however, very modern invention of incorporation has proven valuable (internal economies of scale).
We are seeing a lot of disruption at present among government sponsored monopolies (like taxi services) and via new-found opportunities for individuals to market themselves like corporations. Now your apartment on AirBNB has the same exposure as New York’s Sofitel. The extra they could gain from that corporate-enabled marketing is gone. Still, they are much more efficient than you or I add meeting, greeting, and servicing. Why? Because they do it for 300 rooms in one location. That means Hotels will make profit where ordinary people can’t (other than by avoiding taxes where corporate employees can’t).
So, if Hotels will survive, will Hotel employees remain as employees? Probably. Hotels can contract out some services, but much of their reputation and skill lies in their corporate service culture. If anything, we should expect to see Hotels contracting out their superb cleaning and other services to AirBNB home-lets. Why not? With hotels in most major locations, a big chain like Sofitel are ideally suited to roll out this service. At a cost.
Will other services fall to AirBNB or Uber?
“AirBNB diner”? You have a kitchen: Can you sell me dinner competitively with a restaurant? or McDonalds? No way.
Will restaurants stop having employees? Nope: because they need a corporate culture to provide reliable service.
Large corporations can (and do) contract out innovation. They also buy it in (a la, Microsoft recognizing it is miles behind on mobile and web apps, and going on a buying spree left right and centre. But that won’t change employment (and it might be a sign you should sell, not buy MSFT).
Does it make business sense for United to run its business as Uber-air? A booking site for contract plane owners? Or for LAX to operate as MTurk for flight control? The answer is no, and no. Can we imagine Tesla with no TSLA? Again, the answer is no.
I think there will be a role for corporations very much where we see them now: Large, complex, capital dependent, and enduring enterprises that can repay the burden of coordination and higher-pay that loyal enculturated workers command with dramatic increases in output efficiency.