Until recently, US tech companies were pretty good about taking care of employees from new hire to retirement. Many Fortune 500 companies had explicit no-layoff policies: Hewlett Packard, Motorola, General Motors, McDonnell Douglas, Lincoln Electric, American Airlines, Delta. IBM never laid off a single worker until 1993.
At some point, the employer-employee relationship fell off a cliff. Corporations used to value the loyalty they gained by promising lifelong job security. Now they don’t even want real employees: Nearly all of the 10 million jobs created since 2005 are temp positions.
Does this disprove the Theory of the Firm? According to Ronald Coase, organizations form long-term relationships with employees to eliminate the transaction costs of constant market exchange. Sourcing candidates, negotiation, hiring with incomplete information, making sure contractors don’t run off with a USB stick full of trade secrets – that’s all really expensive!
The Sovereign Individual predicted that technology would eventually automate the firm away. Information systems and AI could seamlessly coordinate a two-sided marketplace. Offices equipped with surveillance devices would measure workers’ output, obviating the need for employee trust. Isn’t that basically Uber? With the help of services like LinkedIn and Gigster and Foundry and Fiverr, we can already reduce transaction and coordination costs to the point where full-time employment makes no sense at all.
Why stop at ruining jobs? Marriage commitments are similarly passé. Humans used to mate monogamously because fathers had to be reasonably sure of paternity before investing in child-rearing chores. It took years to build up that kind of trust. With DNA tests, guys can quickly determine which kids to care about. Better yet, forget about turning parenting into a joint effort — just outsource it to an on-demand app.
Just as technology has lowered the marginal benefits of retaining a dedicated mate, it has also reduced the costs of sourcing such mate. We used to waste so much time on courtship and gentlemen callers and other nonsense, but now we can just swipe on Tinder and Grindr and OkCupid and Backpages.
Firms and family units are dead. That numbness you feel is full-blooded individual empowerment.
Contracts and Trust