Smiling for Profit: Good-Bye, Employment. Hello, Entrepreneurship on the Job

By Motty Perel

About the Book

Employees hate to work their best - for a reason. Some 150 years ago, employees become aware that their labour is their property. They feel entitled to the profit on this property. Once the employer takes away this profit, employees feels exploited. Hence, adversarial relationship toward employers. An employer will regain his employees' full cooperation when he switches from employment to the entrepreneurial mode of labour utilization. This change will render the workplace more productive and efficient because workers will join forces among themselves and with the employer for profit maximization. The employer will be making profit exclusively on his means of production (work premises and utilities, machinery and raw materials). However, that "limitation" will increase his profit because workers will maximize it when the profit on their labour will come to them at the same rate.

The first enterprise that switches to the new mode will become the strongest competitor in its industry. Others will either follow suit or close doors.

Private employment started in the eighteenth century and brought massive progress to societies that embraced it. Human productivity soared to unheard of levels, along with living standards. The industrial revolution came about. Culture produced works of quality unsurpassed until this day.

The rise continued for some 200 years and then started to slow down. These days, human productivity is declining. Technological improvements yield only minor increases in general productivity, while raising unemployment. We are witnessing degradation in culture. While a few are gaining wealth bordering on fantasy, the general wealth is stagnating. Unions have lost their ability to advance wages without causing jobs to move overseas.

The entrepreneurial mode will resume the rise of human productivity. It will create jobs. Capital and labour will cooperate to maximize profits. General wealth will resume its rise and so will the culture.

• Language: English
• Publisher: Trafford Publishing
• Release date: Apr 4, 2008
• ISBN: 9781466956858

Motty Perel

Born in Warsaw, Poland, 1935. My father Joel Perel turned to the profession of care for mentally disturbed children and juvenile criminals. Problems and solutions to abnormal and criminal behaviour were the usual topic at our dinner table for many years. My mother Esther was teaching elementary grades and kindergarten. This intellectual environment prepared me for analyzing human behaviour. I did not consider a teaching career. Engineering attracted me as practical and rewarding. No regrets. The massive gap between potential human productivity at the workplace and its actual productivity puzzled me since I set my foot on a production floor. I was still a student at the time. Later, along my engineering jobs, the puzzle haunted me and demanded an answer. In 1969, the answer to my puzzle suddenly emerged. It had been fifteen years in the making. I attempted to apply my solution, first at two consecutive production facilities where I worked. Then I attempted to set up one myself. All to no avail. My attempts afforded me some notoriety that prevented me from finding professional employment. I immigrated to Canada and after a while started to promote my solution here as well. On the negative side, two important General Managers, one in charge of two plants of Inglis and the other one in charge of fifteen plants of Domtar, lost their jobs when they dared to recommend my A-Option to their superiors. By contrast, the workers I met on picket lines and in the tube-production plant where I toiled for over three years did like my A-Option. The General Manager of this and two other tube-production plants of Jannock did understand me well, but he chickened out. I have no doubt someone will implement my A-Option, with or without me. Motty Perel

Book preview

Chapter 1. 

Is there a Good Employer?

… where we realize that no matter how fair their wages are, our employees will soon run out of enthusiasm. So what is there to do?

Here is a story. It starts as a fairytale but ends as the reality of our time.

A man wins a large sum of money in a lottery. He decides to invest the money in a new production facility that will manufacture widgets. Everyone needs and uses widgets, so selling them for profit will be easy.

The man rents premises and prepays for three months. The rent for premises includes utilities. He rents the appropriate equipment and pays for three months in advance. He buys three months’ worth of raw materials for widget production. Premises, equipment, raw materials and utilities are means of production. He hires workers with experience in widget production and he pays them for three months in advance. The workers come into the premises and start to apply machinery to the raw materials. They produce widgets that are sold as they are produced, immediately after production.

Three months (a quarter) pass. The owner counts the proceeds from the sale of widgets and discovers that they amount to 80% of the sum invested at the start. In other words, he has lost 20% of his invested money.

How does he feel about the loss? Will he cut his losses and close the business?

Maybe, but it’s unlikely. Pessimists seldom start businesses. He would have expected such a loss at the start of a business. After all, the machinery is unfamiliar to the workers and they are just learning how to use it. Out of lack of experience, the workers are working slowly and wasting quite a lot of raw materials. The brand is still unknown in the market, so customers are paying inferior prices for this brand. The owner expects improvement in the next quarter.

How do the workers feel about the loss? Well, they haven’t lost anything: they have been paid their wages. So they are indifferent to the loss. Maybe they commiserate with the owner who is kind enough to pay them three months in advance. Maybe they check out other job opportunities, just in case this employer fails. But they like the chap for his consideration and generosity, so they are ready to do a good job to help him out.

The owner goes on with production. He pays rent for the next quarter, pays equipment rent for the next quarter, buys raw materials for the next quarter and pays wages to the workers for the next three months in advance. The workers continue with enthusiasm.

At the end of the second quarter, the owner sells the new widgets and counts the proceeds. He compares them with the quarter’s investment and finds out that this quarter he has broken even.

How does he feel about having broken even?

Right! He feels good. Things are going in the right direction. No doubt, he is going to continue.

How do the workers feel about the situation?

Great! Their employer may actually make it. They are unlikely to look for another job. And this employer is exemplary. He pays three months in advance; no other employer does that.

The owner goes on with production. He pays rent for the next quarter, pays equipment rent for the next quarter, buys raw materials for the next quarter and pays wages to the workers for the next three months in advance.

This third quarter the workers plunge into work with even greater enthusiasm. They utilize the equipment better. They save on raw materials. The quality of widgets improves as well. The market starts to like the brand and pays a bit more for it.

The outcome is predictable. At the end of the third quarter, the owner sells the new widgets and counts the proceeds. He compares them with the quarter’s investment and finds out that this quarter he has made a profit that covers the loss of the first quarter. Now he has broken even overall. He is going to continue and profits are at hand!

How do the workers feel about this state of affairs? Even better! The good employer has made it in the market. Their jobs are now secure.

The owner goes on with production. Again, he pays rent for the next quarter, pays equipment rent for the next quarter, buys raw materials for the next quarter and pays wages to the workers for the next three months in advance.

This fourth quarter the workers plunge into the work with ever-greater enthusiasm. They utilize the equipment even better. They save more on raw materials. The quality of widgets improves even more. The market recognizes the brand and pays even more for it.

The quarter goes by. The owner sells the new widgets and counts the proceeds. He compares them with the quarter’s investment and finds out that this quarter he has made a profit again. Now his business is profitable. No doubt, he will continue and more profits are at hand!

How do the workers feel about the latest state of affairs? They are glad they have justified their good employer’s trust. If they try harder, his profits will grow further. Chances are he will share some with them.

Sure enough, the owner goes on with production. Again, he pays rent for the next quarter, pays equipment rent for the next quarter, buys raw materials for the next quarter and pays wages to the workers for the next three months in advance.

The workers do their best. The widgets get better and the workers turn out more from the same quantity of raw materials. Themarket recognizes the widgets as superior to other brands. Profits go up.

The first quarter of the second year goes by. The owner sells the new widgets and counts the proceeds. He compares them with the quarter’s investment and finds out that this quarter he has made a larger profit than last quarter. Wow! He will most definitely continue and even more profits are at hand!

How do the workers feel about this state of affairs? They are optimistic. If they try even harder, the profits will grow even higher. Chances are even better the good employer will share some with them.

Predictably, the owner goes on with production. Again, he pays rent for space and equipment for the next quarter, buys raw materials for the next quarter and pays wages to the workers for the next three months in advance.

This second quarter of the second year turns out even more profitable.

Workers hint they want a raise in wages. The owner gives them a generous raise and pays it, as always, three months in advance. What an employer!

During the third quarter of the second year, remarkable changes occur at the facility. Workers share ideas, help each other, pick up the load for those calling in sick. The mood is jubilant. Predictably, this quarter profit rises again.

The workers wait another quarter or two as they watch profits rise and then they ask for another raise in wages.

The employer responds somewhat reluctantly and gives them a bit of a raise. Again, he pays the new and higher wages three months in advance.

The jubilant mood at the facility continues. Workers continue to share ideas, help each other, pick up the load for those calling in sick. Profits go up again.

The workers wait another few quarters as they watch profits rise and then they ask for yet another raise.

This time, the owner confronts the workers and shares the truth with them: their wages are not only competitive but they are higher than what they can make anywhere else with their skills. They should not ask for more raises in the near future.

The next quarter the employer rents the usual means of production again and pays the workers their current wages three months in advance, but no raise.

The workers cannot complain. Indeed, their wages are the highest for their skills and the type of work they are doing. The employer trusts them like no other and pays three months in advance. He is a good and stable employer, no reason to look for another job.

The workers come to work and do a good job.

But tell me, my good and patient reader, do you believe the workers’ heightened enthusiasm is going to last? Will the workers keep sharing ideas as they have done before? Will they keep teaching newcomers enthusiastically? Will they step in eagerly for those calling in sick?

I do not think so. If you have ever worked in a production facility, you agree with me.

As one quarter follows the next, the workers’ enthusiasm on the job wanes toward extinction. Workers stop sharing ideas, because that only helps the owner make more profit, and it may cost them jobs if the market for widgets should slow down. And besides, the employer is already making enough profit without the rest picking up the load of those calling in sick. And the newcomers? Let them learn at their own pace. What is there in it for those teaching them? Besides, the newcomer is not even eager to ask questions because he does not want to appear stupid.

The widgets continue being produced. The employer keeps making profit.

However, the rapid growth of productivity is now history. With steady productivity, profits begin to stall.

The owner grows concerned. He buys more sophisticated machinery with a view to increase productivity. The new gadgets do increase productivity, but the extra expenses consume the anticipated profits.

What we are witnessing here is the negative feedback between rising profits on one side and productivity on the other: as profits rise, human productivity per worker falls.

This is a natural consequence of employment, the contemporary mode of labour utilization (MLU). This MLU is on its way out and will be replaced in due course. Developed countries have been ready for the change for decades.

You may already recognize the solution to the employer’s problem: the employer should keep the profits he makes on his means of production and leave the profit on the labour to its owners, the workers. As the workers try to raise the profit on their labour, they will be automatically bringing the owner’s profit on his means of production to the same level per unit of market value invested. The owner’s profit will come only from his means of production, not from both his means of production and his employees’ labour. You might think that in this way the owner will be compromising his profitability.

Not true.

The new arrangement eliminates the negative feedback between corporate profit and productivity. This feedback is the cause of productivity stagnation. From this point on, the workers will try to raise productivity without the limitation of the negative feedback. And there will be more profit for all.

Production costs will decline. The quality of widgets will continue to rise, attracting higher prices. The owner will be able to acquire more means of production (and thereby increase the base for his profit), while the workers will gain better tools to exert more valuable labour (and thereby increase their own profit base as well). Without being partners to the business, the workers and the owner become partners to the production process.

Both gain.

As you read the rest of this book, you will learn more about this mode of labour utilization (MLU). You will find out how to implement it and what outcomes to anticipate.

Chapter 2. 

What makes us excited?

… where we realize that only Profit* inspires us to perform, while money may only compel us to work. Profit is not always expressed in money. Exploiting people is commercially disadvantageous. About Profit*: see Glossary.

Only the anticipation of Profit makes us excited about what we are doing. Yes, the anticipation of Profit, and nothing else.

Take gambling, for example. Why does the risk of gambling excite us? We hope to win big on our modest investment, that’s what it is. We aren’t discouraged despite our being aware that casinos wouldn’t be doing so well if customers were winning most of the time. We expect our return to be much higher than our investment … and so we play.

A substantiated pat on your shoulder …

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… causes a disproportionately large ego trip.

Even a modest win gives us a boost, causes a disproportionate adrenaline rush. That means the pleasure is caused not only, and often not at all, by the amount of money won, but by the feeling of winning itself.

So, what is Profit?

Is it money? A lot of money?

Let’s see.

When we invest $100 in anticipation of making a return of $120, we are ready for a $20 profit. This definition of the $20 as profit is correct but narrow. There is much more to Profit than just money. Money is only one of the many means of measuring Profit. When we think of it, there are more instances of Profit unrelated to money than instances of Profit expressed in money.

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A boy is standing way up on a springboard tower and is about to plunge into the pool below. Doing that may be scary and unpleasant. But his sweetheart is watching him from below. His expectation of her thrill makes taking the plunge worthwhile to him. What makes him do it, is the difference between his perceived significance of the girl’s appreciation (return on his investment) and his perceived significance of the effort required to overcome the fear and danger of the plunge (his investment). This difference is his Profit. He takes the plunge to take advantage of this difference, for Profit.

And what about money? This time money is not part of the game. Note that the boy takes the plunge regardless of whether his action actually impresses the girl down below or it leaves her indifferent; the important thing for him is that he believes she will be impressed. The perception of Profit is subjective.

Boys and girls, men and women jump off springboards not only when watched by their sweethearts. The investment of effort to overcome fear can be made in order to enhance the jumper’s self-esteem, or to achieve a record. In every instance, the jumper’s perception of the outcome’s importance (return) must be significantly larger than his perception of the effort required (investment). If the difference (Profit) is positive and significant, he will jump.

An infant cries his first cry for the sublime purpose of opening his lungs to the incoming air, thereby announcing to the world his arrival in good health. The stress and the effort of this cry transfers the infant’s blood purification function from his mother’s lungs to his own. Now the infant can be disconnected. The infant makes a small investment of effort and gets a large return.

A baby in a crib randomly moves its arms and legs to get more information about the environment and to attract parental love. The baby moves for Profit.

The random contractions of the infant’s facial muscles produce different fleeting expressions on his face. A certain combination of these contractions draws favourable attention from others to him. When the child repeats this combination of contractions, he gets the coveted attention again. This attention from adults is the infant’s Profit. This combination of muscle contractions produces a facial expression we perceive as a smile. The infant cannot speak. The infant is Smiling for Profit. Hence the title of this book.

A child plays with friends quite often in extremely inconvenient and at times dangerous circumstances. Children exhaust themselves while playing. They often get hurt. They make their investment of effort in anticipation of returns that are much more significant to them: they establish themselves in their group, they test themselves in roles they anticipate to play for real in adulthood. Children invest their efforts for Profit.

Profit can come from perceived recognition by others or from self-appreciation. From the above examples, we can project Profit making into our everyday life.

We buy expensive cars, custom designed houses, fancy clothes—while cheaper cars, standard houses and plain clothes would do just as well for our convenience. We pay the higher price for the admiration (Profit), for