Sunday, July 18, 2010

Corporate Worlds

'Space Merchants' Cover
A science fiction theme that cyberpunk raised to the status of a standard trope is the megacorp, a business firm that has become so big, rich, and therefore powerful that it rivals - or usurps - the powers of sovereign states, even Great Powers. Here, by popular demand, is everything you need to know about them.

As commenter Mr. Blue pointed out in the thread linked above (on rebel colonies), megacorps tend to have a somewhat ill defined business plan:

1) Do teh Evulz.
2) ???
3) Profit!
The need to be a little more explicit in Step 2 should be familiar to us, because this business plan closely resembles the standard economic model for space development:
1) Reach the Moon/Mars/Asteroids/Outer Planets/Stars.
2) ???
3) Profit!
This makes space a natural environment for megacorps. Elegant parsimony can be achieved, with one form of, well, unobtainium explaining everything, from why we reach the stars to why no saints are on the passenger list.

Indeed, in spite of its somewhat iffy reading on the plausimeter, the familiar standby of space mining works pretty well here. Resource extraction industries tend to have a bad reputation; think of the oil industry today. One reason is that vital commodities are commodities: You don't buy gas because gasoline is such cool stuff, you buy it because you need it to drive anywhere.

Yes, you also need a car, but cars can be and are sold for their intrinsic appeal. The same applies to less tangible commodities, such as broadband service - everyone loves their iPhone (except, it appears, the iPhone 4), but hates AT&T, because one company embodies the value of the technology while the other embodies its costs.

Commodities from space, orbital solar power or Helium 3, would likely fall into the same category, unloved necessities supplied by unlovable firms.

Unlovable not least because extractive industries also have a history of bad labor relations - consider here not only a basic commodity, coal, but its glittering crystalline allotrope, diamonds. Underground mining was and is difficult, dangerous work, often done in remote places where the mine is the only industry, meaning that the mine operator dominates the community. And, since so much of that community works in the mine, labor solidarity is also strong; hence mining has been legendary for its strikes.

Before you rush off to Outland, note that the oil industry has no such colorful labor history. John D. Rockefeller is said to have dynamited rivals, but he didn't often call in labor goons; the only major strike in the (US) oilfields was in 1917. The labor force is relatively small, specialized, and well paid - characteristics we might also expect of extraction industries in outer space.

On the third hand, the oil industry doesn't have much equivalent to company towns, except perhaps Houston. So while union busting management thugs may not be a given, they are certainly plausible, for any values of 'plausible' that include space colonies in the first place.

A setting dominated by megacorps would seem to be inherently a lefty wank. Corporation itself is a hiss word, and at least in the tech industry it has been duly replaced by enterprise, evoking not John D. Rockefeller but Captain Kirk. But 'Murrican science fiction has long had a somewhat ambivalent relationship with megacorps.

A theme going back at least to Asimov's original Foundation books is Free Traders (though TV Tropes calls them intrepid merchants). In and of themselves they are far from megacorps, but inevitably they band together in trade federations, which amount to megacorps writ big (gigacorps?), complete with fleets of space battlecruisers. Trade federations retain some of the panache of their Free Trader progenitors, and are not infrequently shown in a positive light - Poul Anderson's Polesotechnic League is a notable early example.

Anderson was libertarian, and Trade Federations work well as a libertarian wank. So can more recognizable midfuture megacorps - I can't cite an example by title off of hand, but I seem to recall books that played them this way. It would be a natural fit for Baen Books.

This gives me a handy pretext for noting that actual business people have a somewhat 'complex' relationship with free market theory - eager to evoke it in order to resist unwanted government regulation, but honoring it in the breach when businesses want government regulation - say, when Disney wants copyright endlessly extended or the MPAA wants it ruthlessly enforced. And in their relations with one another major firms behave in a thoroughly political way - think of Apple, Google, and Microsoft as rival Great Powers with distinct ideologies and grand strategies.

The more a megacorp finds itself cast as a political entity, the more it will act like one. If it raises an army it will have to be concerned with the loyalty and reliability of its troops. Mercs have a poor reputation in this regard, as Nick Machiavelli famously pointed out; people fighting for a paycheck want to live to collect it, and have a marked tendency to let discretion be the better part of valor.

A subtler and more intriguing question is the relationship of a megacorp with its own stockholders. Corporations are structured as oligarchic republics, one vote per share, but usually even large shareholders have little interest in actively exercising their franchise - if the stock is going up they have no complaint with management, and if it is going down they have a simpler option, bailing out of the stock. Contested elections for a corporate board, AKA hostile takeover bids, remain an exception, though at times a spectacular one.

A hostile takeover bid on a megacorp could be even more spectacular, and more problematic - not just a matter of gathering a lot of proxies and showing up at the board meeting. Neither side can simply call in the sheriff to enforce their rights, or what they claim as rights - not when the sheriff is an employee of the megacorp.

The politics of megacorps might thus develop along a time honored line of cleavage, between the monarchical principle of CEOs and the oligarchic principle of major investors. The CEO would seem to have the upper hand, as boss-in-chief of the company, including its army. But if large investors have any class solidarity they will try to forestall this by cutting CEOs down to size, mere functionaries with limited formal authority (and probably limited tenure in office, to restrain their informal authority).

In this dispute the true coin of the realm is legitimacy, the tacit acceptance that someone has the right to give orders and have them obeyed. If a polite request and a gun are better than a polite request by itself, a polite request, a gun, and a badge are better still. Legitimacy is also the ultimate coin of the realm for the megacorp itself - the greatest force multiplier for troops is not having to call them out.

Without legitimacy, political life will be colorful, providing ample story material. It will also be nasty, brutish, and short - think Renaissance Italy, in both respects. But even Renaissance Italy had a few exceptions, notably Venice, a stable oligarchic republic that had some characteristics of a proto-megacorp. Ordinary Venetians had no direct say in their government, but for the era they had considerable civil freedom and a sense that they were, if not shareholders, at least 'stakeholders' in its fortunes.

Megacorps will be successful, in the long run, to the extent that they succeed in legitimating themselves in the eyes of their customers, their workers, and the communities in which they operate themselves.

The image at top comes (for a change) from Wikipedia, not Atomic Rockets. The Space Merchants is in some ways a precursor of cyberpunk, but was written at a time when people were particularly fascinated by the ad business - an era now evoked by the TV show Mad Men, set a decade after the book was written.

Bonus Trope Critique: History, unlike SF, does not need to be plausible.
Let's start with the bad guys. Battalions of stormtroopers dressed in all black, check. Secret police, check. Determination to brutally kill everyone who doesn't look like them, check. Leader with a tiny villain mustache and a tendency to go into apopleptic rage when he doesn't get his way, check.


Thucydides said...

I dislike the megacorp trope simply because it fails to acknowledge the ecological relationships that exist inside any functional economy. What about the microcorps, the medium sized business, regional concerns, start-ups, failures etc.?

As well, megacorps really can only exist inside certain constrained political environments; either they are grown, encouraged and protected by the State (either through the idea that the megacorp provides some essential service or because they are favoured clients of the party in power and receive contracts and monopoly rents because of that fact), or the overall economy is so large that this is simply a large corporation in an even larger economy (many American corporations fall into this category, although once they approach this size, they tend to start playing politics in order to consolidate their position against potential rivals, see the first condition).

Archer Daniels Midland, Wal-Mart and hosts of other corporations fall into these categories, and would make ambiguous "characters" to play off these tropes. for some, they would be valuable business partners and employers, for others hated business rivals and for others, simply blips on the horizon (how does the board of directors of Boeing really feel about ADM?).

Socialist "Megacorps" are simply arms of the State, and revolutionaries who take up arms against the corporate policies of Airbus Industrie's space colonies are revolting against the EU at one remove, bringing us closer to the classic revolt of the colonies trope.

Rick said...

For the reasons you give, 'classical' megacorps would effectively cease to be business enterprises in any ordinary sense, and become political actors (not necessarily 'states,' but more like states than companies). Their ancestral business operations might continue as a political monopoly, or even be farmed out to someone else.

From another perspective, it is probably natural for industries to become oligopolies, much as the blogosphere tends, on any given subject, to have a few big blogs that everyone interested in the subject knows about and follows, and scads of smaller ones.

Oligopoly firms in the same industry have very political relations with each other, like rival great powers, but as said, may hardly care about equally big firms in other industries.

On the other hand, conglomerates have happened in the past and could happen again. And when the players get big, their motivations get complex. Classical economic theory simply assumes that everyone is in it to make money, and in most cases that's an accurate enough approximation.

But billionaires are probably not in the game just to afford a more lavish lifestyle - they are in it for power, prestige, and generally to be the Biggest Kahuna. Basic primate house motivations.

I don't have any particular conclusion to draw from this, except that purely economic rationality ceases to be the whole picture once the players get big enough. For example, there's a certain type of naive left analysis which assumes that power players (such as presidents) are just in it for the money. No, they're in it to be power players.

I can imagine a future at a higher overall economic level where wealth as such becomes nearly irrelevant to status, just as putting on huge, lavish public feasts ceased to be a custom once the industrial age made food plentiful enough that the ability to stage a feast was no longer an effective status display.

Anonymous said...

Rick, your analogy of a space colony/industrial being like an oil company sounds good; the refineries like ground colonies and the oil rigs like the orbitals/astroid bases. A megacorp on Earth who developed colonies X, Y, and Z to mine rare earths and platinum-group metals (and distribute it to other Earth-based companies), might eventually find itself being pulled in two. One part is simply a very large corporation, but the other part more and more starts to resimble a government; this second part is less and less concerned about profit and more about laws, order, and the welfare (or control) of its "citizens" (or "subjects"), until it reaches the point where the two parts actually clash and finally go their seperate ways...or destroyed each other.
It would be a strange and entertaining story about how the HumungoMetalsCorp (HMC) fought a war with the XYZ Civil Authority (a wholley owned subsitery of HMC) and lost its off-world colonies in a revolt...


VonMalcolm said...

With science/technology and the resulting products becoming more diverse and complex are MegaCorps even possible? Building an Apollo Rocket wasn't a one or two corporation project: many specialized companies had to be commissioned to build many specialized parts (this bit of 'knowledge' is from the History Detectives) - according to the show just rebuilding one of these rockets would be a difficult proposition because many of the companies that developed the specific sciences for the specific parts are no longer in existence and the science is buried if not lost. Computers, Torchships, Transport Craft, Personnel Shuttles, Single Stage Rockets, Landers, Weapons, Bio-tech, Robo-tech, Mining Equipment, Space Habitats, Food, Entertainment: it's hard to imagine one Megacorp being able to hold all of these together (esp. in a nefarious way), even more so if many different forms of propulsion were to be used in the solar system: Solar Sails, VASIMR Rockets, etc.

I think an 'Evil Corporation' is more likely: the controller of a specific situation: the aforementioned HE3 mining operation.

Albert said...

A major thing lots of fiction gets wrong about modern Corporations:

Trademarks and Subcontracting.

The car industry is the easiest example of the first point (in europe at least).
Audi, Woltswagen and Skoda have all the same owner(s).
Land Rover is owned by Tata, while Dacia by Renault.
Still, they all have different trademarks and different boards of directors.

Big Players may own thousands of smaller companies and each of these will have their own trademark.
All these are coordinated in a way to maximize profits from a single "control room".
Like exchanging tech and standardized pieces for the car industry.

Sub-contractors are another good thing that is easy to ignore.
Say a Megacorp needs a given product, it sub-contracts the vast majority of the work to the lowest bidder.
It is a pretty decentralized system, where the corporation actually holding a trademark does mostly managemenemt and coordination, but different sub-contractors design, test, build, advertise and sell the products you then see labeled as Nike.
Various car engines are not designed nor built by the same trademark of the car manufactures. But the car is labelled as Opel. Or Skoda. Or whatever.
This is pretty cheaper than each enterprise having to pay for a cadre of engine designers.

This kind of organization is also pretty fluid, the trademark-owning company can change subcontractors pretty fast, and all subcontractors are always in competition with others to get the work from the major firms.

Now, this sounds cool, but what does mean?
-You may not see a single Evulz Megacorp insignia, but a bunch of trademarks from the most different enterprises that act as a "team" but still have some degrees of freedom.

-Subcontractors receive orders and work for multiple trademarks at a time (maybe subcontracting too), and may not know the Evil Megacorp plans.

-Blowing up physical fabs or mining rigs damages mostly subcontractors, while for the main corporation is mostly annoying because they will have to look for a new sub-contractor, not rebuild a fab.

-Assigning responsibility becomes a major pain, because there are boards of directors in each subcontractor. They usually have less money than the Big Boss of the trademark-owning company, and as such they can be used as a scapegoat.

After all, this looks like what Rick said about Megacorps becomeing mostly political entities.


M. D. Van Norman said...

Another possibility to consider is the meta-national corporation or affiliance, such as those postulated by Kim Stanley Robinson and Vernor Vinge. These organizations could take the place of homeland and/or employer after the effective demise of the nation-state.

Ian Wright said...

The Hudson's Bay Company and Honourable East India Company strike me as good examples of real-life corporate states. Both depended on a sovereign state for legitimacy and large scale defence, but both also had their own paramilitary forces and internal legal systems. They both operated on the edges of empire, where it was too expensive for the state to assert full authority. And both were ultimately consumed by their parent governments.

I don't know about the situation with the East India Company, but in Canada the HBC helped create the Metis Nation. The HBC's relationship with the Crown and the colonies also created the conditions that lead to the formation of Manitoba. On a lesser scale there were any number of self-proclaimed 'republics'*, chiefdoms, and territorial governments that lasted about as long as a mayfly's dreams. Some of them self-destructed, while others were put down by the HBC or simply ignored until they went away. A tiny handful became full scale rebellions that had to be put down by British troops.

The HBC and East India Company (Or later, Canadian Pacific or Canadian Nation) are good models for fictional corporate states. They lasted decades or even centuries, were major political players both within their parent-state and internationally, and were far vaster than any mere company towns. Instead of a cluster of space habitats and mining platforms, a space opera HBC would control, say, Jupiter and all the objects in Jovian orbit.

* 'Republics' is in quotes because most of these groups were organized along the most pure expression of 'one man, one vote'. There was one man, who had the one vote. One of these groups ended in a drunken brawl, with the president's last words being "For the love of God, man, don't shoot!"

Rick said...

Ian beat me to the punch regarding historical examples of Ferrell's point. And there could probably be an alt hist in which the East India Company's operations in India rebelled against both the home office of the Company and Britain itself, and established their own independent Raj.

On subcontractors, trademarks, etc., one possible upshot would be 'feudal' megacorps that have only limited - sometimes only nominal - control over their own operations.

Glendower: 'I can summon creatures from the vasty deep.'

Hotspur: 'Why, so can I, or so can any man. But does their business plan include coming when you call them?'

Hugh said...

Rick: 'feudal' megacorps with only nominal control ... aren't we already there in some case? Gulf + Western appears at the bottom of the opening credits for many TV shows and movies, but do they actually get involved in creation?

VonMalcolm: don't Boeing make commercial airliners, UAVs, military aircraft, *and* space hardware?

Cambias said...

The oil business vs. coal is an interesting case study. Coal extraction requires really massive infrastructure (the mine) which leads to the whole "company town" phenomenon. Oil doesn't. A drilling rig fits on a couple of trucks and is reusable. So there were (and still are) lots of small operators, and a big company doesn't have much advantage over a small one in well-drilling because they all rent the equipment anyway. The work is short-term contract stuff, well-paid and dangerous, highly dependent on market conditions (either a boom or a bust).

A refinery, on the other hand, is a gigantic and expensive piece of fixed infrastructure, and those are all owned by giant companies. In effect, the oil producing companies act as the "proletariat" to the refiners -- except that sometimes a big refining company's producing arm is selling crude to another refining company's refining arm, so you don't have any clear divisions. Plus there's the whole class of landowners who are collecting royalties on the oil extracted.

Refinery workforces are unionized and do go on strike, although since a refinery is so heavily automated there isn't much old-school labor action. The big issue typically isn't pay but safety. But since refineries aren't located in "company towns" but rather in major cities, they aren't a very good model for space industry. (It might be different in the Persian Gulf or Mexico; I don't know enough to say.)

VonMalcolm said...

Hugh: Boeing may make commercial airliners, UAVs, military aircraft, *and* space hardware but do they make all of the individual parts that go into the above technologies?

Hugh said...

As people are pointing out, there are different models for large scale corporations.

To me, Boeing seems reasonably close to a genuine megacorp rather than a feudal structure.

Many of the parts in Boeing aircraft and rockets are manufactured by other companies, but they tend to be small and specialized, in some cases only existing because of a Boeing project. In any political or economic dispute, they're going to fall in line. Even a fairly wealthy and independent contractor like Rolls-Royce can't afford to annoy Boeing in any serious way.

(Which would actually be good for a megacorp in any dispute with a government: see, it's not just us, all these other companies think we're right too!)

No doubt internally there's lots of factionalism and corporate in-fighting going on. But externally, Boeing look like a serious attempt at being the one-stop aerospace shop.

Maybe it also varies with corporate fashions. IIRC, the 1970s era 747 is pretty much built entirely in Seattle. For the 787 Boeing have decentralized manufacturing much more widely - something they may be reconsidering in view of the billion dollar delays.

Rick said...

Welcome to another new commenter (and a returning commenter)!

A space extraction might well end up much like the oil industry, with relatively small wildcat operators going Out There, but the major firms and most of the workforce on Earth. Which is sort of a bah humbug from our point of view!

The planebuilding industry is an interesting case, where the sheer scale of operations seems to push toward monopoly. It costs something like $20 billion to develop a new large jetliner, and you have to sell a lot of them to make it back. There is a niche for builders of smaller planes, such as Embraer, but only a policy choice by the EU put Airbus in the game.

This has implicit relevance to space, because developing new spacecraft designs is and may continue to be just as expensive. And how many different space lines will the economy support? Again there might be specialty niches, but only room for one interplanetary Cunard.

Thucydides said...

I wonder.

In any "new" market, there are lots of start ups, as well as older and established corporations looking to find a new profitable niche. There will be a burst of innovation and many companies, but eventually there will be a shakeout and eventually many of the companies will die, be absorbed by their competitors or go on to something else.

The early 20th century is an example where there were dozens of aircraft corporations, and hundreds of automobile corporations in the United States alone. Eventually, despite the growth of the economy (which would suggest you could support more corporate entities), the numbers of aircraft manufacturers and auto makers declined until only one major commercial aircraft manufacturer exists today (Boeing), plus lesser players in various aerospace and military markets (Lockheed-Martin, Northrop-Grumman), and a Big One left in the US (Government Motors and Chrysler are effectively wards of the State, and would cease to exist the second handouts stop).

The same process happened on a vastly quicker scale with personal computers, IBM's PC was followed by Apple, Wang, Osborne, NeXT, get the picture.

Steven Den Beste had a very good piece comparing the growth curve of markets to the Cambrian explosion as recorded in the Burgess shales:
Basically, so long as the "ecosystem" is open, almost any morphology will have a chance to grow and thrive. As the ecological niches are filled and competition becomes more intense, only the better adapted survive and evolve, while the rest go extinct (lots of creatures from that era have no modern counterparts, even their body morphologies no longer exist).

Lots of potential steely eyed rocketmen and financiers are waiting to jump on the rocket or space tourism bandwagon, and the established players like Boeing will move Heaven and Earth to maintain and expand their market share. Some will be able to survive while the niches fill, but only the best adapted to the environment will survive (and it is NOT a given that will be existing aerospace corporations).

Albert said...

An awesome text indeed. It is based on this insight.

"During the expansion stage, it is the virtues of each competitor which decide how well they prosper.
But after the switch to competition stage, it is their faults which decide who will die.
An uneven competitor, with both virtues and faults, may prosper in the early stages but will in the long run be destroyed by a competitor which is uniformly mediocre."


Rick said...

Yes. I still have sitting on a garage shelf an Altos 100 computer - a model so obscure that Google finds only a handful of references to the company (bought by Acer in 1990), and the only reference to the model is an item I posted myself.

Agree that the existing aerospace companies might not end up surviving a space boom and subsequent shakeout. The technology is similar to building planes, but not THAT similar. Note that while the Ford Trimotor is still remembered, no automaker (at least in the US) became a major planebuilder, though from 1920s-30s perspective you'd have thought they had a big leg up.

One WW II trainer model was actually built by the Budd Company, best known for railroad passenger cars.

jollyreaper said...

Going from the assumption that human nature seldom changes and that patterns repeat, I ask myself what it would look like to see revivals of previous social models, maybe sprinkled with some society-changing tech sauce.

We've actually seen quite a bit of scifi with monastic orders preserving the super-science of a fallen prior civilization. We've also seen feudalism and neo-feudalism. The use of titles like king and queen are simply for the convenience of the reader, I doubt that we'd see anything quite so direct.

One thought I had with the mention of free traders is thinking back to how limited medieval life was. Most people never traveled further than 30 miles from where they were born, living and dying in that circle. The romantic appeal of a rogue's life was throwing off those shackles of societal expectations and being your own man.

In a scenario with neo-feudal colonies spread amongst the stars, free traders might be seen as necessary evils. They move the supplies, are trusted intermediaries where the feudal colonies do not trust each other, but they are not loved. They would represent a dangerous potential for spreading ideas and giving the peasants unhealthy ideas about freedom.

Of course, this gets us back to the whole question of how much longer human beings would even be needed for slave labor of one sort or another.