Leadership and Management in America; What’s the Problem Here? Part 1

Note that this started out as a post and it grew so long that it has now turned into four. I’m not going to make any excuses for that as I think everything we are writing about here is important. So these will be coming out over the next day. Some may interest you more than others but, they are all pieces of the puzzle that we as a nation, as businesses, and as leaders need to solve.

We seem to be having moral and morale problems in American society, both business and military today. I have been seeing a lot of stuff coming in in the last few weeks, and I’ll be referring to a number of them here.

First, I’m going to tell you a bit about my background, Most of you know that I am a Lineman, an Electrician, and now an operations manager. In a few days I’ll celebrate 41st Anniversary of my certification as a journeyman lineman. It was a few years later that I wired my first house as an independent electrical contractor. So, I’ve been around and seen a lot.

I think I’ve written before about how I came up. My dad was the General Manager of an REA electric coop, before that he was a lineman and a project superintendent. One of the anomalies in my life is that my parents were in their forties when I was born, and that is reflected in me. Essentially, It was almost like most of my generation being raised by their grandparents. I’m not complaining, what I missed in playing catch and football was more than made up for in life lessons.

Dad taught, without I think even realizing it, how things had been done in my industry even before the Depression. For instance, I know how to set a pole with the biggest piece of equipment being a man. Do I wish to ever do it again that way? No, it’s damned hard work, takes at least 5 men and a couple hours but, a lot of your power lines were built that way. Same thing with climbing poles. Dad’s knees gave out sometime around 1950 when he was a bit over 40. In fact, he told me one time that if he had known what was coming, he would have stuck it out without taking the manager’s job, I didn’t then, and don’t now, completely believe that, knowing how he detested dealing with fools overeducated superiors but, there you are.

Incidentally, if you are one of those people with your whole Love Me Wall covered with diplomas, degree, certificates, and pictures of you with political celebrities you might be interested in what people like me think when we see it. We think you’re a fool, and probably incompetent, too. Why? Because if you haven’t done it for real, you haven’t done it. At best you’re a crony capitalist. That is not meant to diminish real accomplishments, like engineering degrees from Purdue or MIT, J.D. Diplomas (if you’re an attorney), the shadow box containing your military ribbons, although remember a lot of us recognize them, the one for no cavities won’t buy much respect

The thing is, in an REA Coop, like anybody else where there is a lender providing the money, there are rules pertaining to almost anything and how you do it. Somebody described it, I think Herman Wouk in The Caine Mutiny, as a system designed by geniuses for execution by idiots. Add to that the rigid safety rules for working on power lines and suddenly you have a system that is stagnant, where nothing ever changes. Or do you?

It all depends, whether you have a leader, or a manager. In dad’s case, when he went in to the office, lines were worked dead, pretty much always, beyond changing an insulator. This was mostly because you either climbed the pole on hooks or a ladder. It was possible to change a pole hot but, it was a big deal, almost never done on distribution lines.

But, the times they were a changing, foresters, were having trouble climbing trees, that’s even more dangerous than climbing poles, and something new appeared on the scene. It was called a SkyworkerTM and it was a revelation. It was the first bucket truck, there had been platforms, towers, they called them, that went straight up from the truck, and self supporting ladders mounted on trucks, since about the war but, the bucket truck was insulated like a hot stick, so that you could literally bare hand a power line, and it could reach out to the sides of the truck, so you didn’t always have to park right under the line.

As in all industries that deal with things that can kill you quick, acceptance took a while. As it happens, in 1955, dad convinced his board to buy one, actually a demo unit. Talk about a difference, not only did you not have to climb the pole but, you could lift the energized wire out of the way. Now what had taken half a day could be done in a couple of hours. This made it feasible to replace anything up to poles without interrupting service. The replacement of the A-frame derrick with the hydraulic digger derrick a couple of years later made similar improvements. When I was working for a contractor, if we had a competent crew (usually we did) we could change a pole routinely in 15-30 minutes energized, with three men. Again, dad was one of the first. Why?

  1. He knew the job, he had been a lineman since the ’20s and had seen almost everything.

  2. He had been promoted to the position of authority where he could recommend the purchase and help in defining the role of the new equipment, while making sure that safety was not compromised. This included the new rescue procedures needed.

  3. He had the experience to reassure the field people that he was going to keep them safe and that this revolution wasn’t going to cost them their jobs. (Although it may have slowed down new hiring some).

  4. Most of all, he had the vision, foresight, and leadership to see how this would benefit the company, the employees, and most of all the client, the customer.

This is one major reason why companies should promote from within, or at least their own industry. The revolution I’ve outlined above would not have happened without the vision provided by men like dad, he was hardly the only one, but I knew him better. It’s been said before but, I’m going to say it again, If you are an operations company; it needs to be run by operators, everything else is support.

A lot of the trouble I see in American industry today is companies that do various things, meat packing, manufacturing, retailing, logistics, whatever, being run by accounting. That’s bass ackwards. If your company builds widgets, it should be run by people that know how to build widgets, the job of accounting is to keep score, the job of HR is to find the proper people. The job of neither, if your going to effectively build widgets for a profit, is to run the company. They are a support function, and a cost center, not a profit center. Most of them don’t understand this and think they know more than the operators.

Then there is this in my career.

We have been trying since the sixties to make life safe for 3 year olds or idiots, take your pick. The National Electric Code runs on a three year cycle. In 1968 it began requiring grounded outlets, which was a very good thing, when something went wrong with an appliance the current had a safe path to ground and would blow the fuse. That’s all well and good. In about 1975 the requirement became that the equipment grounding conductor become the same size, which if you understand the theory, it should have been from the beginning.

Then was developed in the 1980’s the Ground Fault Circuit Interrupter, which was designed to measure the current on the wires and if it wasn’t equal turn off the circuit. It’s a pretty good idea. It will protect you when you forget to unplug the toaster before rinsing it out in the sink.

Now we have Arc Fault Circuit Interrupters which detect arcs in your wiring and appliances. In fact, if you drive a metal staple too tight when you’re wiring a house, the AFCI will trip. It’s an OK device in many ways, and has probably stopped some fires from occurring.

We are also mandated now to use tamper resistant receptacles which prevent you from putting a bobby pin in an outlet.

All of these things will make your house safer when properly installed. But there is a downside. The circuit that feeds your bedroom costs about thirty dollars in material on the 1977 specification (current dollars). That same circuit wired to 2011 Code will cost about a hundred dollars in material, labor is roughly the same. Safety has a price, and so does regulation.

The most common example, of course, is your car. My first car was a 1963 Bel Air. It had headlights, taillights, parking lights, backup lights, a horn, bumpers, and lap belts which were optional.

In 1968, the government required side lights, and a locking and collapsible steering column, as well as a padded dashboard, in 1974 emission standards kicked in (killing mileage and power) as well as bumpers that would withstand a 5 mph impact. Now we have harnesses, child safety seats, air bags, and I don’t know what all. Why? To protect us from incompetents, why wouldn’t it have made more sense to teach people to drive effectively enough so they didn’t hit things?

Oh, that Bel Air, It cost less than $3,000, maybe less than $2000, new. What’s a new car worth now?

And that is one of our problems, we are protecting the incompetent at the expense of the productive. Apparently we have forgotten that life is dangerous, so dangerous in fact, that no one gets out of it alive. What would an American car be like if we hadn’t squandered all that engineering talent in protecting the incompetent? Nobody knows.

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The American Way of War 2

Lithograph of Lee's Surrender, with Taylor sta...

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There are two main themes to the American way of war. They have come down to us from their first glimmerings in the War of 1812, where we learned that our soldiers, like all soldiers required discipline and leadership. Once we took that lesson to heart, as epitomized in West Point, a distinctly American style became inevitable.

One part was that we needed a different sort of officer, for the American soldier is, and always has been, a free man, giving some part of his life voluntarily to his country. The rigid pattern of Europe would not apply here. The other thing was that from very early America needed engineers, as did the Army, so West Point developed as the cradle of engineering in the United States.

The American style in its adolescence was on display in the Mexican War, with the amazing sight of a major amphibious landing, with the march through Mexico, and especially Stephan Watts Kearney’s march to Santa Fe and then on to California (with only 120 dragoons).

But the real showcase came a bit later. Here is where America became a world power, although nobody realized it, or cared. The American Civil War (or War Between the States, if you prefer) was a spectacle for the ages. Why? Read on.

The showcase war that everyone watched was the Eastern Theatre, with the main actors being the Army of the Potomac (Federal) vs. The Army of Northern Virginia. Here were fought the legendary battles: Bull Run (1 & 2), Chancellorsville, the Seven Days, Antietam, Gettysburg, Fredericksburg, the Wilderness, the Muleshoe, Cold Harbor and finally the Siege of Petersburg. The Union spent years trying to find a general who could win here, the problem being they were fighting two of the finest generals ever to wear an American uniform, Robert E. Lee and Thomas J. (Stonewall) Jackson. The Confederates pretty much ran rings around the Yankees who had the structural problem of being tied too tightly to Washington, although it’s hard to see how it could be otherwise, given that the Occupation of Washington would have led almost inevitably to recognition of the Confederacy by the UK and France.

The legend comes from this; here we have two of the largest armies ever seen up to that time fighting each other to a standstill, not for a season but, for four years with neither one able to finally beat the other. When Grant became Lieutenant General, he co-located with the Army of the Potomac, Grant never commanded that army, G.G. Meade commanded it to the end of the war, what Grant commanded was the United States army. He co-located with this army because he knew he could trust Sherman to fight the Army of the Tennessee properly, but didn’t think that Meade would. He gave Meade the orders that wherever the Army of Northern Virginia goes, there also you will go.

Grant has come down to us as a butcher, much like Field Marshal Haig int WWI. He wasn’t. He showed enough daring in the Vicksburg campaign to scare none other than Uncle Billy Sherman, and Uncle Billy didn’t scare easy.

The thing is from this point on the strategy could have been written by George Patton. The Army of the Potomac held them by the nose, and the Army of the Tennessee kicked them in the a$$.

The real story here for our purposes is this. You remember that earlier I said there are two strains in the American way of war? Here they are, in full display.

The Army of Northern Virginia had the most superb leadership of any American army anywhere, anytime. It fought what may well have been the most powerful army in the world to a standstill for four years. Actually, immediately after the war, not only the US, but both Germany and France adopted the corps artillery plan developed by the Army of Northern Virginia’s Porter Alexander, When Lee surrendered the Army was so fought out that some commentators say that it didn’t so much surrender as pass directly into legend.

The Army of the Potomac on the other hand, while well led, did not have leaders of the caliber of Lee (Grant may have been close, some of his early campaigns would indicate this but the situation did not allow). What they did have was the nascent industrial power of the Union. This was the most lavishly equipped and armed army in the 19th century. It was also the beginning of modern warfare and it took time to learn to use the new weapons like rifled muskets and rifled artillery extended the kill zone by orders of magnitude. The Army even used aerial observation for artillery spotting and reconnaissance. The first crude machine guns made their appearance as well.

The two thrusts of American War making are these:

  1. Superb and daring leadership at all levels but especially in small units.
  2. Overwhelming (and accurate) firepower and mass.

There’s another thing running through this narrative, logistics. The Army of the Potomac was pretty much always well supplied (except tobacco, which the troops habitually traded coffee to the Rebels for). These were huge trains which could have happened only with the railroads that the military built and ran. It was a marvel of the military world, and the world noticed. After Chickamauga, the 11th and 12th corps of the Army of the Potomac were sent to reinforce Thomas. This was by rail (from the History of War): ” By the middle of the first week of October some 20,000 men had been moved to Bridgeport from Virginia, a journey of over 1,100 miles in eleven days.” Think about the size of that movement, and the speed, this was something entirely new in the history of war. There is a story that at one (of the many) places where these trains went around a corner, there were three officers watching, they wore sort of funny uniforms and their headgear was what a later age would call Pickelhaube. Yes, they were observers from the Great German General Staff. Think they learned anything?

And that may be the greatest American innovation to art of war of all. As Nathan Bedford Forrest put it, the main key to winning is “Getting there firstest with the mostest” and Americans do that better than anyone.

Of Railroads and Governments

Route of the first American transcontinental r...

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I was reading over at Althouse the other day. Which if you don’t, you should.

Anyway, one of her commenters came up with that old shibboleth of leftist history teachers that the land grants were a subsidy to the railroads, especially in the Nineteenth Century, and it bugged me, as it always has. So here’s a little history lesson.

One of the first land grants to a railroad was to the Illinois Central, it was one of very few east of the Mississippi River, too. You see the IC had a problem, their franchise was to build a North-South railroad in Illinois. That sounds like a pretty good idea, right. It would have been too, in about twenty years. You see, south of about Champaign or so on the Indiana-Illinois line where the IC was to build was nothing but swampy wilderness. It would have been expensive to build a railroad (it was, when they built it, too) and anyway there wasn’t anybody to serve. There is not much point in investing a bunch of money to build a railroad to serve: Nobody.

Another one of those times when American Enterprise outran rhyme or reason. So, they went looking for a solution, after all, they wanted to be big shots, too. Seems likely they talked to their lawyer, he was a sharp young fellow from Springfield who signed himself A. Lincoln. Anyway they took their problem to their Senator, a guy by the name of Stephan A. Douglas who came up with a solution.

Since most of the land was owned by the Federal Government it was arranged that some of it would be conveyed to the railroad in a checkerboard fashion, in other words, one section went to the railroad, the government kept the next, and so forth. In total, the railroad received about 25 Million Acres. Land that we won in the Revolution.

So the railroad was in the land business. Looks like a subsidy, doesn’t it? It has been portrayed that way ever since. But lets dig a little deeper, here. The railroad has 26 Million acres to sell, BUT so does the government. The government had tried to sell this land for years, with a price of $1.25 an acre for some of the best farmland in the world. But they couldn’t sell it. Why?

About the only thing it was good for was farming, and that is what America did best in those days too. But when you farm, if you want to make a living, you have to sell your crop. At the southern end of Illinois you could load a boat on the Ohio river, so that area was settled. In Chicago, you could ship your grain on the lake (in summer, anyway, in winter the canal closed). In the middle of Illinois you’re pretty much screwed, grain is far to bulky to ship by wagon and flour doesn’t ship well (in those days). You can grow all the grain you want, but it will cost you more to get it to market than it is worth. (for more on this, see my “The Free market, a Case Study“.

American are smart, the farmers knew this and wouldn’t buy the land. But look what happens, they give half of it to the IC, who starts selling it and platting towns to serve the railroad, and especially building the railroad, and what happens. The IC sells their land but, so does the government. Now because crops can get to market, that land came into its own and goes on to set production records.

So did the government subsidize the railroads, or did the railroad subsidize the government. Looks like a pretty fair deal for all to me.

So Lincoln goes on to be President, and he believes we need a Transcontinental Railroad to bind California to the Union, not to mention all that gold.

So, he’s talking one day in Council Bluffs with an engineer named Grenville Dodge, and they are talking about the Transcontinental Railroad and Dodge says it should start there, while he is pointing at Omaha. Lincoln studies it and decides he is right.

In Washington there is a surveyor from California, named Theodore Judah, who has the same dream, sort of in reverse, he convinces Congress that the transcontinental should end in Sacramento. He is backed by California money, while the Omaha end has to raise money and none of them have anywhere near enough, and there is a war on.

So Congress and Lincoln recall how the Illinois Central deal worked out and decide to do it again.

This is much tougher building though, across what was thought of as the Great American Desert and the Sierra Mountains and the Great Salt Lake and what all. So they decided to use the checkerboard pattern again, only this time for 20 miles on either side of the route. They also chartered two companies; the Union Pacific to build west from Omaha, and the Central Pacific to build east from Sacramento, thereby setting up a race of sorts. (If you find this interesting, you should read: Nothing Like It In the World by Stephen Ambrose. It’s a fascinating story.)

So all across Nebraska, Wyoming, Utah, Nevada, and California alternate sections of land were owned for twenty miles each side of the railroad and it was all for sale. The railroad wanted money (sometimes with easy terms), but the government had passed the Homestead Act, so if you built a building and farmed it for a few years you could get 125 acres free. Heckofa deal.

The Union Pacific had a problem, though. It went from Omaha, then not much more than a village to Promontory Point, Utah, which had so much reason to exist that it is now a sign showing where Mathew Brady took his picture. There was no bridge over the Missouri river at Omaha either. So they had a railroad that started from nowhere went through nothing and ended nowhere.

Being smart business men, they had already figured this out and they made sure to make a profit on building the railroad because, they sure as hell would not on running it for years. And they didn’t. The UP went broke in 1893. But by then they had had so much interference from the government that there was no way to make a profit.

So how about the government. They got rid of their good land, some sold and some homesteaded and made some money on land they had mostly bought from France in 1803.

But all that land would still be unoccupied, except by Indians and buffalo, except for a few trails across it, without the land grants.

There are a few other land grant railroads, mostly the Northern Pacific which were built. But by then it had acquired a bad smell and was pretty much abandoned.

Then in the Twentieth Century the government built roads on their own dime and tried to kill the railroad all over again, and nearly succeeded. We should thank God everyday they didn’t manage to quite do it, though.

And that is the true story of the land grant railroads. A truly symbiotic relationship between government and business, that worked for both. We shouldn’t castigate it, we should try to duplicate it, or at least keep government out of the way.

The Free Market: A Case Study

The new American railroads - anonymous photogr...

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We hear the free market damned everyday, lately. Problem is those damning the free market don’t have a clue what the free market is. America’s problem since 1890 or so has been that we haven’t had a free market.

What we have had is a semi free market distorted by whatever advantage could be bought from the Congress. (By the way, one of my favorite jokes is: If pro is the opposite of con, what is the opposite of progress?) Let’s look at a one industry example.

We had the most magnificent transportation system the world had ever seen for both passenger and freight (and mail). What did we do? We came very, very near to regulating it death. The remnants of this system are still the backbone that allows all our other systems of commerce, particularly steel and electricity to function. What am I talking about here? The American Railroad network.

During the First World War the government actually took over the railroads and ran them into the ground (and only paid for a fraction of the damage they did.) World War Two was a little better but not by much. Especially after the looting of the ’30s.

In the late ’40s and ’50s there was enough vitality remaining to help rebuild Europe’s railroads, but the depredations continued. Forbidden by law from being allowed to innovate, forbidden to make a reasonable profit they just kind of held on.

Because of the way the bidding was done the railroad never made a profit on the carrying the mail. By the way, when I was young you could mail a letter at 3:00 pm in New York and it would be delivered in Chicago by 10:30 am the next day, Try that now. FedEx didn’t exist, because the market was covered.

And for that matter, if you ordered your new piano from New York it would arrive shortly in say Moorefield, Nebraska, no problem, take your wagon down to station and pick it up. Now you know how Sears and Montgomery Ward (and for that matter, Chicago, itself) got so big in the 19th century. It was the railroad, and the continent sized common market they created. By the way, you, yourself could take that trip too. Almost any trip over about 15 miles was done by train.

Since we have mentioned Moorefield, let’s talk about it a little more. The last time I was down there it had about 50 or so inhabitants, and one business. That business is a grain elevator owned by a farm coop.

Its serves as a collection/sale point for the local farmers and ships their grain to the far corners of the world. It does this in trainload lots. Some of those mile to mile and a half long trains of covered hoppers you are waiting for today may well have come from tiny little Moorefield, that doesn’t even have a gas station, let alone a grocery store.

Now multiply that by one of these elevators placed every ten miles from roughly the center of Nebraska to Eastern Ohio and from North Dakota to Texas. That is the miracle of American agriculture. There is nothing in the world, and never has been, to compare with it.

How did we get here? When Kentucky and Tennessee were settled in the early years of the 19th Century, and somewhat before, the first settlers were hunters, followed closely by farmers. As soon as somebody could get a mill working (for profit, oh the horror) they would grow wheat. They seemed to like bread. There is a letter written home to Russia from the American midwest in the late 19th century that states, “and we eat wheaten bread, every day.” You see, in Russia, indeed most of Europe, wheat bread was so expensive that it was only for holidays.

Soon though they were growing that all American crop; corn. They did well with it too, with astounding (for the day) yields. They had far more than they could use and they were broke.

What to do? Of course what they did was call their Congressman and lobby for a subsidy to not grow corn, that’s the right answer.

What, you don’t believe those tough old Scots-Irish who would become the backbone of America got subsidies? Well, you’re right. They did have a problem though, if you know anything about handling grain (or flour), you know that packing it in a burlap bag and shipping it in a leaky wooden boat isn’t going to work.

What to do? What to do?

Two things actually. One is raise hogs. Ohio, southern Indiana, and Kentucky corn made Cincinnati the pork capital of the world, for a while. Porkopolis, they called it. The second is to make whiskey, which can easily be described as concentrated corn. Now you know why the American Whiskeys such as Bourbon come from Kentucky and Tennessee. Keeps you warm on cold nights, too.

This is one of the stories about the westward migration you don’t hear much about. Farmers going broke because it cost more to ship the crop to market than it was worth. This happened all the way to the Mississippi River before the Civil War. This is also why states like North Dakota and Nebraska and a bunch of the others, even Texas to a large extent were the highway, very few stopped to settle.

They could tell that the prairie was fertile, and it was obviously going to be easier to till ( assuming the steel plow) than working around the trees of the old Northwest. But it was, and still is to some extent, lonely. (Read your Willa Cather.) That has a lot to do with how middle America has remained so individualistic, compared to city folk. And you couldn’t possibly float a crop down the Platte River, then or now.

It took the railroad, with its unequaled capacity to carry high bulk, low value commodities to make this land productive. And it is a miracle of the ages, the way America produces food stock and move it to market.

Railroad are funny creatures though, they cost a lot to build, particularly since they had to purchase their own right of way, unlike highways and pay property taxes. To break even on a railroad, you need a certain amount of traffic, which depends on a bunch of factors. The weird thing is though; you can expand your traffic, within reason, above this point and make a bunch of money, without raising your costs much, but if you go below the break even point, your costs don’t decrease significantly. This is called a high fixed cost business. The way we regulated railroads had nothing to do with this, of course, we mostly insisted that the railroad maintain every mile of road they had ever built, and pay the men whatever they wanted, whether it had any traffic at all or not.

The automobile became the curse of the railroad. In the beginning the railroads  helped. The Pennsylvania Railroad was one of the sponsors of the good road movement, which had a lot to do with the Lincoln Highway. The Pennsy also owned a pretty good chunk of Greyhound. Their thinking was that for short-haul, farm to market, or local delivery the motor vehicle would fit very nicely into the existing transportation system.

They were right, it would have, and did for a while. Where it bit them in the backside was, the government still wouldn’t let them abandon track, and motor vehicles (and) roads improved to the point where long distance travel was fun, and trucking was feasible .

They made the same mistake with airlines incidentally.

But the real problem was that roads were subsidized by the taxpayer, as were airlines. You really didn’t think that your gas price, or for that matter your airline ticket, actually paid for all the expenses they generated, did you? No, they don’t. The railroad is the most efficient transportation system ever invented.

I hope you realize that I am not referring to government sponsored and subsidized so-called high-speed rail. If it was such a good idea, it wouldn’t need government money. Another name for it is pork. Oink.

So there is a short story of one industry that started in the free market and was almost killed, in some ways, it actually was, by overbearing regulation.

Maybe we should try the free market, before we condemn it so thoroughly.

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