As Corporations Fade, A Search For What’s Next

Apple’s market cap ($607 billion) is more than the GDP of Argentina or Sweden. But the dinosaurs got big, too. And many publicly-traded corporations are like dinosaurs, says author Gerald Davis. They cannot keep up with changes in hiring, sourcing and technology. He attests that they are becoming obsolete, and it’s time to think about what’s next.

Davis, a management professor at the University of Michigan, takes a long-term view that reveals a deeper truth in his groundbreaking new book, “The Vanishing American Corporation.” He points out that the proportion of Americans employed by the 25 largest corporations peaked in the 1970s at around 10 percent of full-time workers. Today, they employ fewer than 6 percent.

Corporations were weeded by hostile takeovers in the 1980s, and they shed millions of workers by outsourcing in the 1990s. Improvements in the Internet accelerated the process, giving corporate executives new ways to hire and supervise new kinds of contractors so they could cut more full-time jobs. Investors pushed things by insisting that CEOs cut costs to maximize profits.

Outsourcing and offshoring juiced corporate bottom lines for a while, but they also made publicly-traded businesses unstable. And these disruptive forces show no sign of slowing down. Davis says that many forms of skilled labor are now going through “Uberization,” which he defines as “jobs being transformed into tasks through the use of communication technologies such as smartphones.”

Lawyers, designers, writers, programmers and even doctors are now experiencing what blue-collar workers faced in the 1980s. They are less likely to hold full-time jobs with benefits and more likely to find “gigs” through sites like Upwork, which supervises home workers with software that records what’s on the worker’s screen at random intervals.

Gerald Davis, author of “The Vanishing American Corporation.”

“This is kind of dystopian,” Davis says. “You expect to be spied on when you’re in an office, but when they do it to you at home, it’s creepy.”

The forces affecting publicly-traded companies are certainly bad for workers, but they are bad for the companies, too.

The number of American companies listed on stock markets declined by more than half between 1987 and 2012. Some iconic companies went bankrupt, like General Motors and Eastman Kodak; others disappeared, such as Bethlehem Steel and Circuit City.

The shift Davis charts is one reason for the resurgence of privately-owned corporations, which aren’t subject to the same pressures. Hamdi Ulukaya, the Turkish immigrant who founded Chobani yogurt in 2005, recently gave his 2,200 workers shares worth up to 10 percent of the company, which is widely considered to be worth several billion dollars.

Ulukaya told the New York Times that the move is a long-term investment in his employees and the company’s well-being. “He could not have done that if it were a public company,” Davis says.

So, what’s next? Nobody knows, but Davis says the technology that is dismantling big corporations could also be helpful to smaller, locally-owned businesses. He is intrigued by the possibilities of computer numerical control (CNC), which allows machine tools to cut wood, steel and other materials to specifications in a computer program. Local fabricators meet through sites like 100K Garages to trade ideas and designs.

“If the shop costs $500,000 and the designs can be purchased from Ikea or an auto parts company or other designers, it’s completely possible that we could see a worker-owned universal fabrication facility that uses locally-sourced materials in every town,” Davis says. “This seems like a plausible and sustainable vision to me. It’s also very American: the drive for local control and local autonomy.”

Davis wrote the book for the general public and policymakers. It’s a quick, thought-provoking read, especially for an undergraduate or high-school student who will need to navigate in this new world. He recommends that students sharpen their critical thinking with a liberal arts education, add tangible skills such as coding, and look for needs that aren’t being filled. “Understand the transition,” he writes in the conclusion of his book. “Be of service.”

Image credit: “The Vanishing American Corporation