One Big Union (Not)

There's an understandable lot of clucking about the news that the building trades unions are teaming up with Andrew Cuomo in going after the  public employee unions.  But in the larger context, it shouldn't be that much of a suprise: the union movement has a long history of internecine competition and conflict.  The reason people speak of "one big union" is precisely  because we do  not have it, and never have.  The AFL-CIO didn't get together until 1955.  True believers in union strenth have never counted the Teamsters as part of the team. We've seen any number of instances where competing unions have clawed each others' face off for new representations.

But I think there is an important long-term shift at work here also. That is:  my take is that unions have become far more sophisticated over the generations in making themselves co-venturers in an economic enterprise: far more disposed to recognize that their well-being rises or falls with the health of their employer.  From World War II until, say, the great inflection of the 70s, unions really didn't seem to care all that much how management made its money: it was management's job to manage the money, and the unions' to claw it away.   

I'd say that attitude had vanished long before the building trades opened their purse for the governor.  Lately we've had Steve Rattner speaking appreciatively of the role played by the UAW's in-house investment banker in helping to engineer the auto bailout.  And just this spring, we've had occasion to observe the American Airlines pilots going over the heads of their managers to talk directly with US Airways about the prospect of merger. Unions have come to know that they are a vendor of services, and that the way to make deals is to respond to the realities of the market.

One more point: many--I--have remarked on the blunt reality that public employee unions gain some of their cachet from their quasi-monopoly position,  as sharers in sovereign power.  I'll stand by that, with the qualification that unions in general thrive if and only to the extent that the employer is exempt from competitive pressures.  That is precisely why unions did so well in the United States between 1945 and 1972--and why they have weakened since.  Yet this leads us to a final irony.  I don't know the details of the New York deal, but just in general can you think of any union that has profited more from this access to monopoly protection than the building trades--not least because so much of their money comes straight from the public fisc, in the problem of government contracts?

Counter-truisms in Anti-Trust Policy (Bell Labs Again)

The other day I offered the truism (as it seemed to me) that monopolies don't need to undertake vast and expensive programs of basic research   Example: Bell Labs.  Oh, right, bad example: Bell Labs, the offspring of Ma Bell, stands perhaps as America's innovator par excellence.

Today in the comments, reader MJH offers up the counter-truism that only monopolies can afford to undertake vast and expensive programs of basic research.  Example: Bell Labs in its salad days (1930-80), in contrast with Bell Labs and successors in decline as they cut back on research in general and cut back more particularly on basic research.

It's a fine point and the fact that these two truisms may seem to cancel each other does not vitiate the force of either.  Indeed it induces further reflection on how Bell Labs understood itself and (perhaps not the same thing) what it was up to with its research program.  So here's the nutshell: clearly, if you had asked anyone at Bell Labs what they were up to, they would have answered (as documented in Jon Gertner's splendid history).  that they were underlaborers in the service of the larger business model.  Gertner quotes  Mervin  Kelly, the executive engine behind Bell Labs,  articulated the standard for any innovative device" "it must be better or cheaper or both." In Gertner's words, "if it wasn't justifiable on economic grounds, it had to be justifiable on technological grounds."

Bell Labs saw itself, then, through a lens of almost Rotarian clarity.  Yet the great irony of Gertner's book (and Gertner gets it) is how utterly at variance is the mantra of Bell in rhetoric with the actuality of Bell on the round.  We can see this in at least two perspectives (though in the end, they may be the same).  One is the extent to which Bell Labs research served rather more to undermine than support Bell's mission (or what Bell thought was its mission)--how, in short, Bell Labs created a world that made Ma Bell (and Bell Labs with it) impossible.  BellLabs, in short, engendered not just whole new industries but whole new industrial structures:the kind of world from which it is hard to imagine anything like a Bell Labs ever emerging again.

The other point--surely this must be related--is just how much fun it appears to have been: how much somebody (Kelly?) created or at least tolerated a world in which researchers would go about their work with sheer gusto.  My point is not that it is wrong to have fun, but rather that when you are having fun, it may be difficult to persuade yourself you are not doing what it says in the rulebook you should be doing.

What we have here, then,  is just the kind of thing a decent competition policy is supposed to prevent: managers largely exempt from the laws of the marketplace, free to do pretty well what they damn pleased with shareholders money.  It's precisely the regime that is supposed to lead to long weekends on the links at Augusta, gold doorknobs on the executive washroom doors and strategic plans directed to the pursuit of shiny objects.  Yet in a backhanded, upside down,  sort of way, it worked.   I shouldn't let myself be misunderstood here: in fact I am largely hospitable to the traditional model: managers insulated from the market do tend to morph into self-replicating bloodsuckers.  Still in spite of it all, somebody gets it right, and Bell Labs may be just one of those cases.

Bell Labs and Monopoly Innovation

[Repost: I put this up last night and then somehow it mysteriously disappeared.--ed.]

An insight about monopoly innovation came home to me while reading The Idea Factory, Jon Gertner's highly readable and instructive history of Bell Labs, the research arm of  Ma Bell,  the old Telephone Company.  It's a point probably old stuff to the cognoscenti but perhaps still an eye-opener to the vulgar horde (that would be me).

Here's the thing: we are all taught that the (a)  problem with monopoly is that it discourages innovation: the monopolizer grows fat and somnolent and we all pay more for less.  But Gertner demonstrates that for a generation or more, Ma Bell was one of the great innovators, and that the Labs were the engine.   But Ma Bell was a monopoly--worse, a regulated, sanctioned, monopoly, with all the power of the state behind it. How can this be?

Answer--who'd have guessed?--Ma Bell seemed to have lived through the entire time in a state of paranoid anxiety over the fear that they might lose their beloved  monopoly.  And so they hustled every way we might expect a competitor to hustle.  And more: because they were a monopoly, Ma Bell always had a surplus (a rent?) available to plow back into R&D..  Which is to say, Bell Labs.

The fear was not groundless.  We know that, of course, because in the end the government did break up Ma Bell (Bell Labs lost its moorings more or less as an incidental casualty, an afterthought).  But long before the final breakup, Ma Bell knew that parts of the government wanted to break it up and would have if they could  Ma Bell held them at bay partly through relentless innovation.  But there was a second prong to their strategy: they threw themselves into the arms of the Defense Department.  For a long time, it seems, there was a sort of functional membrane between Bell Labs and Defense that nourished organisms on both sides.

This relationship with the Defense Department suggests that there was something in Ma Bell's competitive DNA beyond mere paranoia.   That would be the competitive zeal that comes with warfare, or the threat of warfare.   Which is to say that Ma Bell was driven not just by zeal for lucre, but also by ideology and a salting of nationalist bravado.  Note to self, is there a good history of DARPA, the Defense Advanced Research Projects Agency?  And what, exactly, is/was the relationship between Bell Labs and DARPA?

In any event, in an it seems that everyone is some flavor of libertarian, it is almost impossible to imagine ourselves back into a time when the state nurtured and was nurtured by such a semi-private free-market octopus.  Even more astounding, from our blindered hindight, is the extent to which it actually worked.

If They Make Me Head of the Transition Team...

...here's what I'm supposed to read, at least on anti-trust. I'd love to see lists like this for a dozen other subjects (Kevin?) (Bob?) (Diane?)

Of course, I am not for a moment suggesting I actually intend to read all this stuff, or any of it. But it's nice to float in the sea of possibility. And I am consoled by Tim Muris' suggestion that if you're reading stuff on anti-trust, you shouldn't be heading the transition team.

I should add that I trust they will not make me head of the transition team anyway. Lucky me. Lucky you. Lucky everybody.