May 2007

People who worry about the increasing gap between rich and poor generally look back on the mid twentieth century as a golden age.

In those days we had a large number of high-paying union manufacturing jobs that boosted the median income.

I wouldn't quite call the high-paying union job a myth, but I think people who dwell on it are reading too much into it.

People who worry about inequality look back on the mid twentieth century, when high-paying union jobs boosted the median income, as a golden age. They're reading too much into it.

People who worry about inequality look back on the mid-century union job as a golden age. I think they're reading too much into it.

Oddly enough, it was working with startups that made me realize where the high-paying union job came from.

In a rapidly growing market, you don't worry too much about efficiency.

It's more important to grow fast. If there's some mundane problem getting in your way, and there's a simple solution that's somewhat expensive, just take it and get on with more important things.

EBay didn't win by paying less for servers than their competitors.

Startups made me realize where the high-paying union job came from. In a rapidly growing market you don't worry about efficiency; you grow fast and just take the expensive solution. EBay didn't win by paying less for servers.

Startups showed me where the high-paying union job came from: in a fast-growing market you don't worry about efficiency, you grow fast and overpay for whatever's in your way.

Difficult though it may be to imagine now, manufacturing was a growth industry in the mid twentieth century.

This was an era when small firms making everything from cars to candy were getting consolidated into a new kind of corporation with national reach and huge economies of scale.

You had to grow fast or die.

Workers were for these companies what servers are for an Internet startup.

A reliable supply was more important than low cost.

If you looked in the head of a 1950s auto executive, the attitude must have been: sure, give 'em whatever they ask for, so long as the new model isn't delayed.

In other words, those workers were not paid what their work was worth.

Circumstances being what they were, companies would have been stupid to insist on paying them so little.

Manufacturing was a growth industry then, consolidating into corporations with huge economies of scale. You had to grow fast or die. Workers were what servers are for a startup: a reliable supply mattered more than low cost.

Those workers weren't paid what their work was worth, but companies would have been stupid to pay them less.

Manufacturing was a growth industry consolidating into huge corporations that had to grow fast. Workers were their servers: reliable supply mattered more than cost, so they were overpaid.

If you want a less controversial example of this phenomenon, ask anyone who worked as a consultant building web sites during the Internet Bubble.

In the late nineties you could get paid huge sums of money for building the most trivial things.

And yet does anyone who was there have any expectation those days will ever return?

I doubt it.

Surely everyone realizes that was just a temporary aberration.

The era of labor unions seems to have been the same kind of aberration, just spread over a longer period, and mixed together with a lot of ideology that prevents people from viewing it with as cold an eye as they would something like consulting during the Bubble.

Basically, unions were just Razorfish.

For a less controversial example: anyone who built web sites during the Internet Bubble got huge sums for trivial things, and everyone realizes it was a temporary aberration.

The union era was the same aberration, just longer and mixed with ideology that keeps people from viewing it as coldly as consulting during the Bubble.

Basically, unions were just Razorfish.

For a less controversial version, ask anyone who built web sites in the Internet Bubble — huge money for trivial work, gone now. The union era was the same aberration, just longer and wrapped in ideology.

People who think the labor movement was the creation of heroic union organizers have a problem to explain: why are unions shrinking now?

The best they can do is fall back on the default explanation of people living in fallen civilizations.

Our ancestors were giants.

The workers of the early twentieth century must have had a moral courage that's lacking today.

In fact there's a simpler explanation.

The early twentieth century was just a fast-growing startup overpaying for infrastructure.

And we in the present are not a fallen people, who have abandoned whatever mysterious high-minded principles produced the high-paying union job.

We simply live in a time when the fast-growing companies overspend on different things.

If unions were the work of heroic organizers, why are they shrinking now? The fallen-civilization story — our ancestors were giants, with a courage that's lacking today — is just nostalgia.

The simpler explanation: the early twentieth century was a fast-growing startup overpaying for infrastructure. We aren't fallen; we just live in a time when fast-growing companies overspend on different things.

If unions were the work of heroic organizers, why are they shrinking now? The fallen-civilization story is nostalgia. There's a simpler explanation.