Why Multinationals Run a Better Ship than Government

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The future of our world is going to be drastically different to what you see now. Power and control as we know it, in the form of Nation States, will evaporate. A bit over a week ago I wrote about the financial clout of some of the world’s biggest tech companies. If you missed it, you can recap here.

We live in an age where the world works in real-time. And for those that stand still too long the world passes by. With the need to stay relevant, the only way industry can survive is to adapt, innovate and keep up. And the one industry that hasn’t and will never keep up is government.

Structurally, government doesn’t work in today’s world. Decisions take too long. All they seem to do is stop and debate. For every step forward there’s an opposition road block and two steps back.

The operational structure of a multinational is different. The CEO runs the show, but ultimately he/she answers to the board. The CEO has their vision and strategy that takes the company forward over a number of years. This allows for long term planning, and short term action. Performance determines if the leadership stays or goes.

Think about when Apple released the iPhone. It literally altered the course of how we communicate and created its own billion dollar economy, the App economy. But imagine if business operated the same way as government?

Imagine if multinationals had to go through the ‘Government Process’ in order to get a product to market. If they did, when Apple released the iPhone, the process might have looked something like this…

Apple: ‘Hello Microsoft, check out our new product. It’s called the iPhone. It will change the world, and be great for the people.’

Microsoft:‘Hey Apple, we don’t think the iPhone is a good idea. We’re going to debate its relevance with you first, but only in about 10 weeks of the year. Then, you can try and submit a proposal through two separate committees. Only then, if the majority say yes in both committees, can you make it. By the way, we control the majority of one of those committees, so heads up…it won’t get through.’

Luckily, the decision making process for a multinational has nothing to do with the opposition. They operate independently and in a way that’s more relevant to the trends and needs of society.

A multinational must keep a sharp eye (and ear) on what their customers want, need, and sometimes, what they’re not aware they need. A multinational that doesn’t truly understand the way their customers think and behave ceases to be relevant. And when that happens, performance goes out the window and so does the business.

Government is supposed to be accountable to voters. But at the end of the day they can stuff up policy after policy and still remain in charge. Based on the speed government moves they’ll always be a step behind. And more often they’re reactionary in the way they make policy for the people.

Because of the way multinationals can manoeuvre, companies like Apple, Google, Amazon, Oracle and Microsoft can change in any market condition to remain profitable and relevant. They have an operational efficiency that allows for speed, efficiency and action.

Government doesn’t change or make decisions fast enough to stay relevant in today’s world. And they certainly aren’t profitable. Because of that, the power shift has already begun. I’ll discuss the shift of power from government to multinationals in next week’s essay.

Next Stop, GoogZealand
 

With the operational capacity to stay at forefront of innovation, multinationals will soon have a choice on their hands.

  1. Stay under the current hampered regime of government control, or
  2. Break away from government that retards progress and find their own piece of territory.

The second option might be closer than you think. Here’s what Larry Page, Google CEO had to say this week (in his own unique way) during the annual Google I/O Conference,

The other thing in my mind is we also haven’t, we haven’t maybe built mechanisms to allow experimentation. There’s many many exciting important things you can do that you just can’t do because they’re illegal or they’re not allowed by regulation. And that makes sense; we don’t want our world to change too fast. But maybe we should set aside a small part of the world, like going to Burning Man [festival] for example…
‘That’s an environment where people can try out different things, but not everybody has to go. And I think that’s a great thing too. I think as technologists we should have some ‘safe places’ where we can try out some new things and figure out what’s the effect on society what’s the effect on people without having to deploy it kind of into the normal world.
‘And people who like those kinds of things can go there and experience them, and we don’t have mechanisms for that. So those are the kinds of things I think about.

Let me put that simply. Larry’s suggesting a part of the world freed from the shackles of regulation and government control. Free to explore the boundaries of human capability in a positive sense. You might call it Googlonesia or GoogZealand perhaps…?

Imagine a place where you don’t need to go through 52 different sets of laws to trial an automated car. A place where if you launch a new device, let’s call it ‘Glass’, politicians don’t sook-up about breaches of civil liberties and privacy.

A place where the speed of technology and innovation is unleashed to enhance the way we live.

And how long do you think it will be until this ‘small part of the world’ of world becomes a new country of the world? Judging by the recent treatment of Apple, HP and Microsoft, not long.
The recent Congressional tax hearings in the US have raised tensions between tech giants and the government. It might be the straw to break the camel’s back.

Essentially, the US government are blaming companies like Microsoft, HP and Apple for a broken tax system. Senator Rand Paul (who actually defended the tech companies) put it best, ‘The Congress should be on trial here for creating a Byzantine and bizarre tax code.

Sen. Paul went on to say ‘Frankly, I’m offended by the tone and tenor of this hearing…I’m offended by a $4 trillion government bullying, berating and badgering one of America’s greatest success stories.

At some point, those that are being bullied fight back. When you get prodded and jabbed time and time again, eventually you push back. If you don’t, by the way, you become a victim for life.

The most effective way to push back, particularly in the current world environment, is financially. If the US isn’t happy with the amount of tax tech companies pay, wait until they don’t pay tax in the US at all. Appcrozonglecle (which I defined last week) currently pay over $12.6 billion in tax in the US. That’s a bit over half a percent of total US tax receipts.

That might not sound like a lot. But consider this the US will spend $10 billion in the Budget as part of a new infrastructure project. This project is for ‘competitive programs to encourage innovation in completing high-value infrastructure projects’. Without tax revenues from Appcrozonglecle, that policy is gone.

Tech multinationals drive innovation and are vital to economic growth. Isn’t it ironic they are condemned for not providing enough to a defunct economic system?

In all reality, without them the economy would be in an even worse state. It’s the epitome of biting the hand that feeds you. It typifies everything that’s wrong with government.

You Can’t Live in an iPad, But You Can Live at Google
 

If the tech multinationals are sick of the way they’re treated and go off to another part of the world, how will they do it?

It’s fair to say you can’t live in a search engine. And an iPad certainly won’t provide you with food and water. But with the long term vision of multinationals, often they allow a better standard of living for their people than any government does.

Take a look at the investment in infrastructure and benefits already happening and scheduled to happen in the next few years.

Apple is building a new 176 acre headquarters, with a price tag of around $5 billion. Microsoft, Netflix, Amazon, and Facebook are also all building brand new headquarters and infrastructure for their workers. But these aren’t just your plain old average office blocks.

There’s a bigger picture in play here. It’s a level of foresight that proves multinationals have a clearer long term view of the world than any government. And that they’re prepared to put it into action.

Right now government is preoccupied with crisis after crisis. Each government only seems capable of looking to the next election, and determining their policy accordingly. At the moment they can’t see past the ends of their noses, let alone try and put down a road map for the future of the country.

Multinationals have to look two or three steps ahead, particularly tech-multinationals. With the ever changing world of technology, if a company doesn’t look to their next great project or next innovative product they will find themselves irrelevant and out of business.

At the end of the day, whether a company is an oil company looking to the future for its next oil reserve or alternative energy source, or a tech company looking for the next iPhone, or next iteration of the computer, business is business. And they must continue to evolve and innovate to remain in business.

And one of the ways business evolves is to invest in its infrastructure and people. Take for instance Google.

Google is building a 42 acre headquarters just up the road from its existing ‘Googleplex’. But it’s not really a headquarters. They’re building a community. Complete with a ‘Main Street’ the plan is to have childcare centres, dry cleaning, restaurants, sleep pods, gyms, kitchens, learning classes…the list goes on.

They’re putting services and utilities you get outside of the work environment…in the work environment. The purpose is to make a happier, healthier, more productive, collaborative work environment.

And it’s not just for workers. The structure of it encourages family participation. Want to bring in the kids? Go for it. In fact the next generation is vital to their bigger picture.

Imagine being a kid spending your early years hanging around the Google community. It’s the kind of environment that breeds innovation and advancement. It’s a new form of society.

It also develops a future generation of Techkids. Kids more prepared for and relevant to the future of the world.

This kind of foresight far outstrips the foresight any government has. And it’s due to a belief that these multinationals have the capability to make a better world.

Your Laws are Old. I’m going to Make Better Ones
 

The ability of a multinational to adapt, innovate and create allows them to shape our future world. It means they might build a community, a new society complete with their own social values…and laws. Obviously this is something that’s also been on the mind of Larry Page,

I think that pace of change in the world is increasing. Part of what I think about is I think that we haven’t adapted mechanisms to deal with that. And maybe some of our old institutions like the law and so on aren’t keeping up with the rate of change that we’ve caused through technology.

‘If you look at different kinds of laws we make and things like that, they’re very old. The laws when we went public were 50 years old, law can’t be right if its 50 years old, like it’s before the internet!

I get the feeling Google’s future ‘part of the world’ might have slightly more progressive laws than the ones they deal with today.

Financially the multinational is more powerful than government. And they have a vision of the future as a better world. Importantly they’re putting the mechanisms in place to achieve this. Sadly government seems to throw roadblocks in the way at every step.

It’s only so long that great multinational leaders like Larry Page, Tim Cook and Steve Ballmer will put up with a government system that holds them back and berates them.

Soon enough, they will break free. They have the resources, they have the vision. The power shift is happening, and soon they’ll be able to put it into action.

Regards,

Sam Volkering
for The Daily Reckoning Australia

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From the Archives…

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The Fatal Flaw at the Heart of Modern Economics
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The Warning Signs for Australia’s Economy
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Sam Volkering
Sam is Editor for Money Morning and it's small-cap and technology analyst. He spends his time hunting down the most exciting stocks on the planets, whether they’re potential-packed volatile small-caps or tech firms transforming our future through cutting-edge technologies. You can find more of Sam’s work over at Australian Small-Cap Investigator, where he shares the best small-cap stocks he finds on the ASX, or at Revolutionary Tech Investor where he reveals the latest breakthrough tech investment he’s discovered.
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Kyle Amadio
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Sam not to sure if you are navie or looking to stir debate. The failure of governments to deliver for its population is no reason to suggest corporations will do a better job. Most large companies are exactly the same as a government. In fact most management teams end up behaving just the same as government bureaucracies, they protect their own patch in defference to the greater good. the best way to get the best out of any government is simple transparent government. make all lobbying activities public knowledge, remove rent seekers, mostly big businesses.

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