In popular culture (and in some business publications) for years an image of the “business shark” has been cultivated – a cold, calculating cynic in an expensive suit who steps on people’s heads, breaks rules, but brings super profits to shareholders. Sort of like Gordon Gecko or Patrick Bateman. Of course, many libertarians (and we among them) value rationality and the ability to disconnect unnecessary emotions when it comes to figures. But there is a fine line between rationality and pathology. And a new meta-study, published in the Journal of Applied Psychology, clearly highlights this line.
What is it about? Psychologists Lenke Roth and Ute-Kristine Klecke analyzed data from almost 50,000 people. Their results knock the Hollywood myth flat: psychopathic traits lead to terrible work performance! We’ve been used to thinking that a psychopath is such a brilliant manipulator who outsmarted everyone. In reality, statistics show something different.
Firstly, individuals with psychopathic traits simply have low productivity; they work worse than others. They also provide no help to colleagues. In a healthy private company, success is the sum of efforts. A psychopath won’t lend a shoulder, even if it depends on the fate of the project. Moreover, such people are prone to counterproductive behavior, which is the most interesting thing. Sabotage, bullying, theft, delaying deadlines – this is about them. From the perspective of a free market, an employee concludes a contract: time and skills in exchange for money. A psychopath de facto violates this contract. Instead of creating value, he engages in destroying the company’s social capital.
Individuals with so-called secondary psychopathy also “stood out” – they are impulsive, hostile, and unable to control their emotions. They are delayed-action bombs that explode the office from within.
What should employers do? Your business is your private property. You have full rights (and even an obligation before your wallet) to filter those you allow on your doorstep. Don’t be fooled by charisma and ostentatious self-confidence during interviews. HR screening, personality tests, and thorough reference checks are not bureaucracy but protection of your investments. One such “wolf from Wall Street” can scare half your productive department (high employee turnover is a typical result of psychopathic personalities among managers), and you’ll spend years clearing up the losses from a toxic atmosphere.
And now, seriously – if, reading the description of psychopathic traits (the absence of empathy and guilt for harming people, manipulative behavior, impulsivity), you suddenly recognized yourself… then there are news for you. You aren’t an “alpha-predator.” You are an inefficient economic agent. The market harshly punishes inadequacy. Your inability to fit into cooperation and work towards results makes you poorer in the long term. Being toxic is economically disadvantageous.
Libertarianism is built on the principle of non-aggression and voluntary collaboration. Psychopathy often pushes people to violate both. As long as you don’t initiate violence, no one should force you into treatment – your body, your business. But rational egoism suggests: if your “hardware” malfunctions and prevents you from earning, maybe it’s time to take some medication and fix the system? Consent to therapy is not weakness, but an investment in your human capital. Psychopathic individuals should think about this before they simply stop hiring them even as pizza delivery guys. Because the further along we go, the more widespread understanding will become that a psychopath is not a profitable employee, but a risk and source of damage.
Despite the fact that only a tiny percentage of people are actually capable of committing brutal violence, politically, supporters of non-violence ideas are currently in the minority. The majority, at least passively, consider the use of force justified in the implementation of state coercion, and some people even actively resort to using this tool of force in the pursuit of their goals. And how can the ideas of non-violence be promoted in such a position?
To do this, let us consider how some other ideas that were very unpopular in society were promoted, for example, the ideas of the LGBT movement (it does not matter how you personally feel about this; moreover, if you believe that movements of this kind must be stopped by resorting to violent measures, then you are simply a violent person—realize this fact and reconsider your outlook on life). Of course, there are relatively few representatives of this movement in society, which means they simply would not have had the chance to defeat all their enemies at once. But that is not necessary; it is not essential to deal with everyone at once, it is enough to choose one goal. Suppose a specific business began to implement a policy of discrimination against LGBT representatives, or some person spoke about them in an extremely negative key. By gathering together, the representatives of the movement have enough strength to organize a campaign of harassment against a single subject. Of course, this subject, faced with strong condemnation, will begin to lose their reputation; if it is a business, its income will be jeopardized. Seeing this, other opponents of the ideas of this movement will not want to risk their money and reputation, and therefore will make certain concessions. This is how the LGBT movement managed to promote its cultural agenda and achieve recognition in many countries—in fact, in most developed countries, where half a century ago homosexuals were afraid to even walk down the street holding hands.
A similar strategy could be used in the promotion of the ideas of non-violence. All supporters of violence cannot be defeated at once, especially considering that a significant part of society, albeit passively, is still on their side (moreover, they themselves are biologically incapable of initiating violence, as most of the population have a strong version of the violence-inhibiting mechanism, but this does not prevent them from having certain views and morally supporting other people who are more prone to violence). But, again, there is no need to fight everyone all at once. It is enough to choose one subject who advocates for violence and organize a campaign of harassment against them, as a result of which they will suffer certain losses. Other subjects, seeing this, will make concessions to us.
One of the concrete implementations of this strategy could be the conclusion of non-violence contracts. For example, deciding to do business with a certain organization or person, one can demand the inclusion of a clause in the contract stating that in the event of disputed situations, the parties cannot resort to violent measures of influence, i.e., cannot turn to state judicial and law enforcement structures. Instead, the resolution of the conflict must be carried out exclusively within the framework of non-violent reputational and financial influence. If the other party agrees to such a condition, it will create a positive precedent that will greatly help in the further popularization of non-violence ideas. If they refuse, then they can be condemned as a supporter of violence according to the model described above.
Thus, even with a small number of active supporters of non-violence ideas, it is possible to effectively deal with a certain number of supporters of violence. And those remaining will simply decide to make concessions in order not to lose their business or avoid ending up in social isolation. Over time, the agenda of non-violence will become recognized and generally accepted, which is what we strive for!
For example, I want to open a cafe. Opening a cafe in the city center, I run a high risk of losing money to the state. How can I avoid this, and is it even worth risking opening an illegal business in modern Russia with a physical space and people inside? It feels like agorism right now is only about selling substances, but I don’t want to sell substances on Tor; I want to run, for example, a cafe, and there is absolutely not that kind of anonymity—you need people to know about it, and it needs to be out in the open. That is completely different from the substances market, for instance, where you can do business via Tor. Furthermore, if some problems with the authorities arise, the courts and law enforcement are monopolized, and no one will protect me from the arbitrary actions of tax officials. What should I do? Wait until avoiding taxes becomes the norm? Grease palms with bribes? Then the money will go to government officials and increase their interest in creating problems (so there would be more bribes). It’s some kind of vicious circle.
The question is accompanied by a donation in the amount of 0.0001985 btc
Agorist practices always imply a certain solidarity between counterparties against the state; this is what you should focus on when figuring out how to build your shadow business. For instance, if you set up a tax-free establishment in an open square in the city center, you have only one chance to avoid repressive pressure from the state: if, in response to such attempts, your customers immediately shoot the state representatives to hell, and the state knows this in advance. Outside the Chechen Republic, you cannot count on this, so let’s move on.
Since we are talking about the catering sector, I would suggest a different business model. Find a business center that isn’t too posh, with a lax access regime, visit every office, and present your simple commercial proposal—that every working day during the lunch break, you are ready to deliver a hot set meal at a fixed low price, with payment in cash. Here is a link to a Telegram bot; every morning until 11:00, an order can be placed by choosing one of three set meals, and from 13:45 to 14:15, the order will be delivered to the office. That, essentially, is the whole model. You will need to rent a kitchen space as a private individual, hire staff under the table—and get to work. You don’t even have to introduce yourself by any name; your name is the Telegram bot. Oh, and you’ll also need to spend some money on writing the bot. Alternatively, the bot can be replaced by a website, but that depends only on how widespread Telegram is in your city.
By the way, to avoid walking around with your advertisements in vain, when you promote your hot lunch service, bring some tasty pastries with you; they’ll go down great in offices whether it’s closer to lunch or closer to five o’clock. Then you won’t just be “some guy who came by with brochures,” but “those people with the buns who can also bring hot lunches.”
Of course, this model works better when there is some life in the offices, so the period of total self-isolation is not the best time to start such a business. On the other hand, right now you can organize free meals for doctors in hospitals, funded by donations. Some NGOs are already doing this; nothing stops you from starting to hone your organizational skills right now. Any charitable organization spends part of the collected funds on its own needs, so, as long as you aren’t greedy, you will at least be able to provide a minimal income for yourself and your employees, plus earn a reputation and visibility, and the object of charity will be grateful to you and, if necessary, will provide a ventilator out of turn.
Of course, this idea is not new, but there will be space for agorism in this sphere for a long time, especially outside the capitals
The economic crisis that began in 2014 hit the Russian mechanical engineering industry hard. Compared to 2008, the situation for enterprises was complicated by political sanctions against Russia. On one hand, the twofold drop in the ruble became a positive factor, increasing the cost of similar foreign machines and reducing competition in the domestic market for domestic producers. On the other hand, imported components, on which the production of Russian equipment heavily depends, became more expensive. The cost of mechanical engineering products rose. Manufacturing plants became concerned with import substitution, but so far this task has not been solved.
Another negative factor was the decline in economic needs. With the exception of orders placed by the military-industrial complex and state corporations, the rest of the market slumped sharply. Total demand for the products of mechanical engineering companies decreased more than it did in 2008.
Unlike our enterprises, foreign companies quickly reoriented and began to additionally stimulate demand for their products in Russia by introducing new financial services. They began providing buyers with unprecedented discounts, long-term interest-free installments, leasing, and practicing other methods to stimulate purchasing activity.
In the crisis situation, domestic companies chose different tactics. A number of enterprises (for example, a crane manufacturing plant in Chelyabinsk) diversified sharply, changing their assortment and concentrating efforts on exports and working with key clients. However, most mechanical engineering companies preferred to sharply reduce the amount of products manufactured, focusing on various ways to optimize expenses and reduce costs.
One of the enterprises caught in the whirlwind of these economic events and experiencing the negative consequences of the crisis was the Mashinstroy holding (name changed).
About the company
The Mashinstroy production holding has a long history and tradition. It includes production enterprises, a design bureau, and its own sales unit. The holding produces tractors, municipal equipment, bulldozers, and special-purpose equipment for the military-industrial complex with a fairly wide range of modifications. It is one of the few mechanical engineering companies in Russia that has preserved the engineering competencies and production base necessary for producing modern products.
Sales Market
Mashinstroy works with customers from Russia and small developing countries, to which sales are carried out largely through political channels. The competitive environment in which it offers its products is not very saturated. On one hand, there are Western manufacturers, whose equipment, after the fall of the ruble, exceeds the cost of similar products from the holding by 30% or more; on the other, there are Chinese plants, whose equipment is lower in quality and currently not widespread in Russia.
Management
The mechanical engineering holding consists of a number of independent enterprises located in different regions of Russia. They are managed by a management company located in Yekaterinburg. The powers of plant directors are limited to solving only operational issues. All strategic tasks are formed in the management company. In most cases, all communications between enterprises were also carried out through the management company.
The formalized development strategy of the mechanical engineering holding became irrelevant under the current conditions. A new anti-crisis strategy has not been adopted. In this situation, each head of an enterprise within the holding independently seeks solutions to exit the crisis.
Finances
A high level of fixed costs remained in the holding. At the same time, product output dropped sharply, leading to a fall in turnover and profitability. High indebtedness and the inability to take new bank loans increased the need for working capital. For this reason, the deadlines for several contracts were missed. Against this backdrop, financial flows decreased even further.
Personnel
As a result of the reduction in production volumes, salaries fell in most divisions of the holding. Key specialists began to resign. The level of motivation and engagement of personnel dropped sharply. Gradually, some enterprises began switching to a part-time work week, which served as another push for the resignation of several important specialists.
Products
The range of products is quite wide: municipal, agricultural, quarry, and construction equipment. In addition, a number of enterprises have competencies in producing military equipment. The engineering company constantly develops new equipment, including innovative types. New modifications of existing products are constantly being developed, and models that have proven themselves in the market are being updated.
General Situation
Starting from 2014, the situation in the holding has been constantly deteriorating. A shortage of working capital makes it impossible to ensure the deadlines for existing contracts. Despite the demand for the holding’s equipment, the ability of the enterprises to meet the needs of the mechanical engineering market has also decreased. Parallel to this, the capacity of the Russian market is shrinking.
In the absence of an actual strategy in the field of sales and marketing, a large amount of work-in-progress has accumulated, which, against the backdrop of a shortage of working capital, further exacerbates the situation of the mechanical engineering holding.
With rapidly falling turnover, the holding’s fixed costs remained at the previous level for quite a long time. Profitability began to drop rapidly, going into the negative within a year. Having a large loan portfolio, the holding began to delay loan payments. Delays in salary payments appeared in each of the business units at the enterprise.
Questions
What solutions do you see for bringing the Mashinstroy holding out of the crisis?
How should these solutions be integrated into the overall development strategy of the holding?
Answer
1. What are the downsides of this type of enterprise organization, such as a holding? First and foremost—transfer pricing. The owner of a holding always has the temptation to sell the products of one of their enterprises to another of their enterprises not at a market price, but at an undervalued one. What does such a protectionist policy lead to? Exactly the same thing that protectionism at the state level leads to. The holding’s enterprises become less competitive compared to their direct competitors in the global market, as they may not care much about sales. Why bother if the buyer is “one of their own”? They will buy anyway.
During a period of economic growth, this all seems like trivia, but in a crisis, there are no trivialities.
Thus, the first and obvious direction of optimization is increasing the autonomy of the holding’s enterprises.
2. A crisis is always characterized by a decrease in the share of CAPEX and an increase in the share of OPEX in enterprise budgets. So, the second obvious direction of optimization will be reorienting from the finished products market to the production of spare parts, warranty and post-warranty service; as for finished equipment, the goal should be not so much to fight for the shrinking Russian market as to push into the global market with all possible strength.
3. A strong point of Russian mechanical engineering is still a fairly powerful design school. It makes sense to negotiate with the Chinese about production in China based on Russian projects. Yes, this means that the holding’s design units act directly to the detriment of the production units. From the perspective of social obligations, it is not very “comme il faut” to reduce labor-intensive production, but from the perspective of the holding owner, developing a potentially more high-margin research and design direction is certainly profitable.
4. When the price of labor drops even further compared to the Chinese, production in Russia can be resumed, and “made in Russia” mechanical engineering products can be sold in the Celestial Empire, which sounds fantastic for now, but the Russian leadership is confidently moving the country in exactly this direction. Of course, this will mean the entry of Chinese comrades into the capital of the corresponding enterprises of the holding. It is also possible that the enterprises could be offloaded to them entirely, and even for a relatively decent price. Of course, this move might not work, because you never know exactly when the state will decide to tie the hands of a drowning man, imagining he actually intended to save himself. However, this caveat applies to absolutely any step taken by a legal business, so it is not necessary to repeat it every time.
5. A lack of working capital means that strategic investors must be sought. For this, it may be necessary to take some of the holding’s enterprises public through an IPO, which, in essence, would mean their exit from the holding while the current owner retains, say, a blocking package of shares. In return, refinancing, a change to more effective management, and involvement in new technological and sales chains could give these enterprises a development impulse, and for the current owner, mean a transition from losses to profits.
A scientist and talented manager, let’s call him SM, headed an experimental laboratory at the sunset of Soviet power, and after 1991, created a private firm to monetize its scientific developments. The partnership proved successful. A clientele emerged, placing commercial orders, and a steady flow of cash followed. The scientists’ earnings increased, and it became prestigious to enter the laboratory, including for the purpose of defending a dissertation. In the new economic conditions, SM strengthened his good name—his personal brand, as they say now.
The scientist was wise and understood that he would not live forever; in the mid-2000s, well into his sixties, he chose his best student (BS) as his successor, who owed the boss a great deal. They verbally agreed that after a few years, the teacher would hand over his scientific post and a share in the business to the student under certain conditions. Until that happened, the successor was appointed as SM’s deputy with signing authority.
Time passed. But the “grandfather” aged slowly. On the contrary, developing an enviable energy, he managed to marry yet again—this time a young (very young and beautiful) student, a PhD candidate from the provinces. SM intensively began arranging the life of his new family: he solved the housing issue on a large scale, started traveling to resorts with his young wife, took up downhill skiing in his old age, and meanwhile devoted less and less time to work. But business was going well: the deputy did not let him down, and money arrived in SM’s account regularly. Commercial orders grew, and the laboratory was strengthened by new staff brought in by BS. For his part, SM did not mistreat the future successor and, as he believed, paid him generously, very generously. Everything was fine; for the boss, a warm, almost “Boldino” autumn had begun.
The Climax
However, complex and unpleasant questions were accumulating in the deputy’s soul, such as “how long must I wait?”. He had the same thoughts as Pushkin’s Onegin regarding the uncle who was, as is well known, of the most honest rules. The best student continued to remain No. 2, although he was eager for the No. 1 position. BS could not ask the boss directly when he would take over. Yet he received indirect signals from SM that the agreements were still in force. The message was: wait, my friend, and happiness will be yours; meanwhile, our business is my personal business.
Not immediately, but BS realized it was time to stop worrying and start acting. He began with something simple: creating his own client base by poaching his boss’s clients. He registered his own company and nudged customers toward the idea that, for tax reasons, the contract for the work should formally be concluded with his company rather than the boss’s firm.
Over time, BS attempted to switch the largest companies to himself, whose executives knew SM personally. They signed the documents, extending the trust they had in the teacher’s name to the student. Perhaps everything would have slipped through here as well, but every now and then BS began to let slip in conversations with old clients that he, BS, was actually conducting all the business in the scientific company, while the “grandfather” was useless. He claimed the boss was pushed around by his young wife, understood little about the business, and it was long past time for him to retire. All of this did not escape the attentive ears of the interlocutors. Some of them informed SM in polite terms about the danger he had failed to notice, being preoccupied with an intensive family life.
The Resolution
Several years passed this way. SM’s wife successfully defended her dissertation and, through patronage, obtained a very good position, remaining as young and beautiful as ever. The same could not be said for her husband, who had crossed the threshold of his seventies. He remained impeccable in providing for the family’s material needs, but he could no longer maintain the greatly increased spiritual and other needs that such a beauty craved and undoubtedly deserved. However, some other men, far from being Doctors of Science, were quite capable of providing these other needs. The professor eventually reached this discouraging conclusion after connecting the corresponding dots. The family life cracked and quickly came to a logical end. The spouses separated, and in doing so, the wife managed to secure the enviable shared living space as a memory of her husband.
The teacher, left alone, was as if waking from a faint, and after a short period of reflection, returned to his laboratory—or, to put it in modern terms, to business. His business. It turned out that his professional skills had not vanished; his favorite work not only comforted him but again began to bring pleasure. But the euphoria of the return did not last long, only until SM conducted a detailed analysis of the orders and contractual relationships. First, suspicions arose that orders were disappearing somewhere, and then he looked at the documents, quickly remembered the warnings of his friends, and met with them. The truth revealed itself to him in all its harsh guise, and he finally understood, turning to the facts, that his deputy was brazenly and effectively openly stealing his business.
A conversation took place between the teacher and the student, if it could be called a conversation. After that, having calmed down and reasoning concretely as businessmen—but without the extremism sometimes characteristic of businessmen (they were, after all, intelligent people)—SM and BS realized they were in a difficult situation and began to think about how to live further. Initially, each saw emotional arguments for an immediate and harsh “divorce.” But upon more detailed analysis, factors emerged in favor of continuing cooperation, whatever that might entail.
Meanwhile, the rift between SM and BS became exposed, consequently alienating the employees. Strangely, the battle line was drawn not between the “old” and “new” staff brought in by the boss or his deputy, but along the moral positions of the parties, mainly on the question of who cheated whom. Furthermore, the confusing scheme of how orders were processed began to affect the quality of the work. Mistrust grew among clients toward the laboratory, its head, and the deputy: from the outside, it was impossible to tell who was right and who was wrong. Other negative factors appeared, which ultimately led to a weakening of the flow of orders and affected the financial situation of the employees.
With each passing day, the situation became worse…
Questions
How should the characters in the case have acted to avoid such a situation?
How can the current conflict be resolved? What would you recommend SM and BS undertake to reach an agreement?
Is it possible to preserve the profitable business created by SM in such a situation? How can this be done?
Constraints. The company owner is already over 70 years old. Even if he returns to the operational management of the business, he will not be able to engage in the company’s development for long. Additionally, it is important to note that the private research firm was created thanks to the owner’s authority and connections based on a state laboratory. One part of the business cannot exist without the other.
Answers
1. How should the characters in the case have acted?
As is easy to see, all the misunderstandings in the given case arose due to vague agreements. The first vague agreement: BS is forced to do all the work for a salary, based on a promise to inherit the business in an undefined future. The second vague agreement: the absence of a prenuptial agreement and, consequently, a conflict of expectations between SM and his spouse. The third vague agreement: the dubious legal status of the entire business, since officially it all remains a laboratory within a state research institute, and it is precisely this legal form that forces the first agreement to remain vague.
It is clear why SM preferred to stay under the wing of the state in the early nineties: it provides enormous savings at a stage when the business has not yet stood on its own feet. Here you have premises in the institute at the budget’s expense, plus a wealth of various informal connections in state structures of different levels, which can be used to pull off various schemes.
In the new post-Soviet economic reality, passing on the position of laboratory head as an inheritance is somewhat archaic. The timely establishment of a more adequate company structure could have provided the tools to prevent the conflict between SM and BS. For example, SM could have received a share in the business in addition to a salary and gradually increased it. The business itself could have been scaled more confidently instead of being confined to the size of a laboratory—but that, of course, is a matter of taste, ambition, and market conditions.
In general, the only task of a business owner that cannot be delegated to managers is controlling that management does not plunder the business. If the business owner does not perform this single task, then he alone is ultimately responsible for the business slipping through his fingers. To the extent that the state can be likened to a commercial company, the people are certainly responsible for the appalling quality of state management and the plundering of state property into the pockets of civil servants—but that is an off-topic in this case.
Thus, if regarding the business, the solution lies in removing it as completely as possible from state regulation, then regarding marriage, such things are not permitted by family codes. According to the code, a prenuptial agreement cannot provide for economic sanctions for extramarital affairs, which makes SM’s position in this deal more vulnerable. However, this is not so important. All agreements could have been concluded in advance. On the other hand, such romantic infatuations in old age are inevitably accompanied by a certain affectation, so it would be strange to expect a sober view from SM during the “mating season.”
By the way, if the company had been separated from the research institute in its time and represented an independent business, the appearance of SM’s spouse on the horizon would have inevitably led BS to demand clear guarantees of receiving the business; otherwise, it would have by default passed as inheritance to SM’s spouse, without all these dances with appointing a new lab head at the scientific council.
2. How can the current conflict be resolved?
I would advise formalizing the separation of roles. SM remains the lab head in the research institute until he decides to retire, and also holds the status of a scientific consultant with a good salary in BS’s company. BS retains his position as head of sector (or whatever it was) in the boss’s lab and remains the general director of his own company. As for what form to keep SM’s company in, I won’t venture a suggestion. Management could be transferred to BS. One of the companies could be liquidated. They could be merged into a holding. It’s not fundamental.
The point of the proposed solution is that each party has tools against the other, but no incentive to use them without extreme necessity. SM continues his scientific work, which should have a positive effect on his mood and zest for life, and the salary in BS’s company will allow him to continue living in style, as he is used to. At the same time, he no longer needs to ensure the business is not being plundered, since the business has already been transferred; only the rent remains. BS retains all clients and operational management, which means he has guarantees of maintaining control over the business and incentives to develop it in every way. He could fire SM, but then he would lose his position in the laboratory.
But the example you chose was not very successful. In 1998-1999, there was no conscious deregulation; the state simply defaulted on its credit obligations, which led to it stopping borrowing for quite some time. Investors, no longer having such a tempting option as investing in government securities, began to invest more actively in the real sector. Moreover, the financial crisis sharply lowered the cost of assets, and the fall of the ruble lowered the cost of labor. In general, in full accordance with the Austrian theory of the economic cycle, recovery after a crash happens quickly if one does not interfere with the process, which is what happened—not because the government was so wise, but because it was bewildered and did not know where to start.
So the example you proposed is more about the fact that state non-interference in the economy during a crisis has a very beneficial effect on the economy. Even to illustrate that state non-interference in the economy has a beneficial effect on it in general at any moment, additional examples are needed, and better yet—logical arguments. Although, of course, people love history precisely because it is a set of instructive tales for any life situation, so do not hesitate to provide historical examples if you see that they are in demand with the audience. You won’t prove anything with them, but you certainly can sell an ideology.
After all, for people, 1998 is more associated with something like this, rather than with the liberation of business…
