Silicon Valley and the Logic of the Globalized Economy

netflix-logo-DSThe technology driven global economy is brutally competitive and has put enormous stress on businesses to adapt or die.

I lived through this at Accenture. When I started the firm was a partnership that did almost entirely consulting, mostly in an on-shore, on-site model with bespoke solutions.  By the time I left, the company had become a publicly traded corporation that pulled in huge revenues from completely new businesses like long-term outsourcing contracts, delivered contracts through blended on-shore/off-shore model that was heavily delivery center based, and tried to sell standardized solutions. The company’s name had even changed. It was a far more competitive business at the end of my tenure than it was at the beginning.

Having lived through it, this wasn’t pleasant. It involved radical cultural change. Candidly, I don’t know anyone who came from the “before” era who really liked the “after” one, even if they thrived in both.

With the exception of the IPO, which was arguably a partner cash out, all of these actions were more or less forced on Accenture by the global marketplace.  Had the company not made changes, it might easily have would up another has-been. I’m assuming there’s been further major change since I left, since that’s just the nature of the economy today.

To see the ultimate logic of the global economy we need only to look at Silicon Valley. The following passages in a recent New York Times magazine piece on Netflix caught my eye:

There is another underappreciated aspect of Netflix that Hastings views as a competitive advantage: what he calls its “high performance” culture. The company seeks out and rewards star performers while unapologetically pushing out the rest.

One person who helped Hastings create that culture is a woman named Patty McCord. The former head of human resources at Pure Software, she was also Hastings’s neighbor in Santa Cruz. She car-pooled to work with him and socialized with his family on weekends. “I thought the idea for Netflix was kind of stupid,” she told me. But she trusted Hastings’s instincts and wanted to keep working with him. Her title was chief talent officer.

The origins of the Netflix culture date to October 2001. The internet bubble burst the year before, and Netflix, once flush with venture capital, was running out of money. Netflix had to lay off roughly 50 employees, shrinking the staff by a third. “It was Reed’s first layoffs,” McCord says. “It was painful.”

The remaining 100 or so employees, despite working harder than before, enjoyed their jobs more. McCord and Hastings concluded that the reason was that they had held onto the self-motivated employees who assumed responsibility naturally. Office politics virtually disappeared; nobody had the time or the patience. “There was unusual clarity,” McCord says. “It was our survival. It was either make this work or we’re dead.” McCord says Hastings told her, “This is what a great company feels like.”

….

For those who fit in, Netflix was a great place to work — empowering and rational. There are no performance reviews, no limits on vacation time or maternity leave in the first year and a one-sentence expense policy: Do what is in the company’s best interest. But those who could not adapt found that their tenure at Netflix was stressful and short-lived. There was pressure on newcomers to show that they had what it took to make it at Netflix; those who didn’t were let go. “Reed would say, ‘Why are we coming up with performance plans for people who are not going to work out?’ ” McCord says. Instead, Netflix simply wrote them a check and parted ways.

In 2004, the culture was codified enough for Netflix to put it on a sequence of slides, which it posted on its corporate website five years later. It is an extraordinary document, 124 slides in all, covering everything from its salaries (it pays employees what it believes a competitor trying to poach them would) to why it rejects “brilliant jerks” (“cost to effective teamwork is too high”). The key concept is summed up in the 23rd slide. “We’re a team, not a family,” it reads. “Netflix leaders hire, develop and cut smartly, so we have stars in every position.”

One of my last interviews at Netflix was with Tawni Cranz, the company’s current chief talent officer, who started under Patty McCord in 2007. Five years later, McCord, her mentor, left. When I asked her why, she visibly flinched. She wouldn’t explain, but I learned later that Hastings had let her go.

You may recall a similar take on Silicon Valley corporate culture from the Times on Amazon. Journalism, a field that has been squeezed hard by technology and economic change, seems to look very askance at the Silicon Valley model.

What we see here is the “superstar” model, where firms are looking to hire all “A players” who are willing to be ridiculously committed to work, in a strong common culture, where there’s tremendous focus on performance – “high performance” in the case of Netflix (and Accenture – whose tag line is “High Performance. Delivered.”)

Because Silicon Valley has largely gotten a pass from the rules and norms that apply to every other industry in America, they’ve been able to take this to the next level, so we see it in the purest form. The results in Silicon Valley speak for themselves.

You can say that this is inhumane, but look at how many sectors in tech have become de facto winner take all. Netflix has serious competition out there, and it’s not at all clear they will be the long term winner. Their focus on being that winner is not at all misplaced according to the rules of the marketplace.

In short, this remorseless, amoral, brutal global economy is producing a sort of superstar talent economy in the developed world, whereby if you want to succeed, you need to be not just good but the best and utterly devoted to success.

Reality might not be quite that bleak, but this is clearly a force that’s been at work.

Most of us have probably had some experience with this kind of increasingly competitive and demanding environment. I know I have. You have to be a lot tougher coming out of school today than when I did.

Now consider that most of you reading me probably have an IQ of 115+.  And we are all still feeling the heat, although some of us surely thrive on it at some level.  Imagine what it’s like for people who have a below average IQ, which is by definition half the population.

If we proceed on with the superstar economy, where enormous value can be delivered with relatively small teams of ultra top players, what does that mean for the social environment?  It’s worth pondering what the future would look like if the Netflix/Amazon models of personnel became more standard.  The nature of technology and global competition seems to be pushing things in that direction.

from Aaron M. Renn
http://www.urbanophile.com/2016/07/06/silicon-valley-and-the-logic-of-the-globalized-economy/

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