Hillary Clinton Minds My Business (And Yours)
Gregory Sullivan has been listening carefully to Hillary Clinton, and has a message for her: "I don't want to stay vertically integrated until I'm horizontal, thank you very much." Not that he believes that she would actually care what he thinks.
November 18, 2007 - 1:00 am
“I can’t worry about every small, undercapitalized business in America.”
“I suppose I could have stayed home and baked cookies and had teas, but what I decided to do was to fulfill my profession which I entered before my husband was in public life.”
- Hillary Clinton
My wife is baking cookies in the next room while I run a small, undercapitalized business in America, so I guess we’re Hillary Clinton’s target audience. “Target” has several meanings, you know.
I don’t believe in parsing off-hand comments for deep meaning. I found neither of the quotes cited above outrageous. I understand fully what Hillary Clinton, and her husband before her, is all about. Neither of them have sympathy for my concerns nor plans to help me with them. Of course we’re not much use to Hillary either. She knows I won’t be funneling any money to her politically if I can’t even afford a funnel yet. My wife is less than useless to her, not even supplying her with political furniture to re-arrange.
So we understand Hillary Clinton, and she understands us. And since we’re looking for nothing from the government anyway, there’s no way she can disappoint us. “Disappoint” has several meanings, also.
But I don’t think you all understand Hillary Clinton much; because if you’re reading this, I bet you’re plenty capitalized, or work for someone that is, and immune to such concerns. Whatever Hillary Clinton does if elected President, you’re mostly going to read about it in the papers and cluck your tongues, or purr over it to taste. I’ll live with it. So let me explain the MetaMeaning of her worldview to you, simply: I am running a small, Vertically Integrated business run from my Dining Room. Hillary Clinton would like to make large, important portions of the United States economy into a Vertically Integrated business run from the White House.
Trust me, I know all about the format, and you shouldn’t be interested.
What’s Vertically Integrated mean, you ask? Wikipedia is as accurate as anybody for an answer:
In microeconomics and managing management, the term vertical integration describes a style of ownership and control. The degree to which a firm owns its upstream suppliers and its downstream buyers determines how vertically integrated it is. Vertically integrated companies are united through a hierarchy and share a common owner. Usually each member of the hierarchy produces a different product or service, and the products combine to satisfy a common need. It is contrasted with horizontal integration. Vertical integration is one method of avoiding the hold-up problem. A monopoly produced through vertical integration is called a vertical monopoly, although it might be more appropriate to speak of this as some form of cartel.
I’m the president of my business, and I sweep the floor. I do everything that comes in between, too. That’s vertical integration. It’s a symptom that I’m not that successful, yet. I’m forced to do all sorts of things I’d rather not because I can’t afford to hire them out yet. Hillary Clinton thinks whole sectors of our mature economy can, and should be run this way. I’ve noticed that all bad managers crave vertically integrated management. Me, I want to stop sweeping the floor.
I learned about vertically integrated management by reading about John D. Rockefeller. He made Standard Oil into a colossus by controlling every aspect of his oil business, from pumping it out of the ground to pumping it into automobiles. But vertical integration was a transitional device in American business history. It was necessary for Standard Oil because he couldn’t rely on his suppliers upstream and his distributors downstream to do what he wanted to do in a timely, reliable, and cost-effective fashion. There is an Emersonian story of Rockefeller sitting in a factory with a worker that soldered the lids on metal cans that held Standard’s first big product: kerosene for lamps. Rockefeller asked how many drops of solder were necessary to hold the lid on without leaking — but no more. The worker said he just put on as much as he could to ensure that none would leak. Rockefeller sat there with the fellow, trying it over and over, with less solder each time, until they got some leaks. Then they added back one drop and standardized the procedure. A tiny savings, but over a huge volume it mattered.
John D. Rockefeller was a business genius. He and Henry Flagler sat at a two sided office desk and handed a piece of paper back and forth which became essentially the format for the modern corporate structure. And I’ll bet you a hundred thousand dollars in cattle futures that if he was alive today, he’d have nothing to do with vertical integration.
Hillary Clinton thinks she can sit in your doctor’s office and count the pills and save us all a lot of money. I don’t generally hire Yale lawyers to do that, and wonder if we can hook David Ricardo in his grave to a dynamo if she does. Who’s David Ricardo, you ask? He was an economist, and his big idea, which is a very big idea indeed, was that everybody would do better if no one did anything but what they were the best at. Even if you were better at another thing, too, than someone else, it was a waste of time to do anything but what you’re best suited for. Again, from Wikipedia:
There is an illuminating example illustrated in the well known book Economics by Paul Samuelson. Imagine a city where the best lawyer happens also to be the best secretary, that is, he would be the most productive lawyer and he would also be the best secretary in town. However it is quite clear that this lawyer would focus on the task of being an attorney by employing a secretary instead of doing all the paperwork by himself. This can easily be explained with the concept of comparative advantage: He is the best secretary AND the best lawyer, however by comparing what he can earn as a secretary with the income he could earn by running a law firm AND employing a secretary one can clearly see that the latter option is the better one.
Vertical integration generally goes against Ricardo’s Law of Competitive Advantage these days, bigtime. No one should ever do anything except what they are the best at. It means that even though I might do a bang-up job at sweeping the floor, I am wasting my time doing it when I could be doing higher level work.
Trying to vertically integrate things in reverse is a form of economic barbarism mixed with nostalgia. People like Hillary Clinton think the Depression was OK because FDR was president. That’s the kind of gig she likes. FDR famously thought the economy was like a football game, and the president called plays in the huddle every day. That’s how you got the alphabet soup of Acronym government programs that made you feel better about 25% unemployment that never got any better.
The modern economy is confusing and disturbing to statists. They have a fundamental misunderstanding and mistrust of it. They believe that the economy is being run by a few persons, and they believe themselves bright, so they know they can run it better. The problem is, you can participate in the modern economy, but it can’t be run. Few even know what it’s like to run every aspect of their own business any more, never mind anybody else’s. Except me, of course, and people like me. We understand that we must substitute our own exertions for the paid exertions of others at first. It’s why you hear that people in start-up businesses work so many hours trying to establish themselves. To people like me, watching Michael Keaton in Multiplicity isn’t entertainment, it’s more of a documentary. But since there’s no cloning machine in the modern economy, the only way to “make more people” is to work sixteen hours a day in the short term, (there’s two!) and then go out and hire others to help, eventually. Getting the benefit of other people’s exertions on your behalf takes money to entice them. Or a law, to make them.
The least efficient entity I’ve ever encountered is the government, at all levels, in all instances. Even when it’s being ruthless, it takes its sweet time about everything. Death Row would be a drive-up window with a menu, open all night, if McDonalds ran it. (Would you like “fried” with that?)
And me, Mr. Vertically Integrated himself, knows all about inefficiency. I can’t answer the phone if I can’t hear it over the table saw I’ve got running while I should be coding my website anyway.
Hillary Clinton’s big idea is to think the government can run a vertically integrated version of Medicine. I have my doubts. Bad managers like vertical integration because they are immune to outside pressure to perform. There are no upstream producers giving you things before you’re ready to process them, and no downstream vendors selling things before you’re ready to supply them. And vertically integrated monopolies run by the government don’t even have to worry about the customers. No one can go to another vendor. And the opposition party cannot offer an alternative other than the destruction of what been cobbled together, which is like asking if you’d like your ration card torn up during a famine once the thing gets going. The beast will never die once Igor pulls the switch, until it collapses under the weight of its own bureaucracy.
Hillary’s already told me to drop dead, figuratively. She’s looking for the power to enable her to tell me to drop dead, literally, now. Wanna give it to her?