What Matters
I’m not sure what to write for an intro this week, so I’ll just dive in.
The year is 1826 and you’re a laborer in coastal France. Work is good. Very good, actually. Several years prior, a man of about fifty named Monsieur Leblanc entered town and purchased the yarn factory, replacing outdated spindles with those multi-spindle machines that have become so popular in Britain. Through his business success, the whole town has flourished. You had been scraping by before, but you’ve been enjoying several years of relative comfort. You have honest work and you’re able to provide for your family.
There’s a lot of excitement this year because the price of cotton has dropped. One franc now buys two pounds of US cotton, whereas in the previous year the same franc was only good for one pound. What does this mean for the factory? Somewhat odd among your peers, you have a simplistic model that you use to understand business:
Shareholders invest money in hopes of generating a return on their investment. Employees receive money in exchange for their time and work for the business. Customers give money in exchange for a valuable product or service.
You apply this model to the present situation. Employees of the factory are treated fairly. M. Leblanc will employ anybody, with only one prerequisite: “Be honest!” Everyone receives a fair wage for an honest day’s work—rumors are that with the lower cost of cotton you might stand to earn more in wages—and you along with everyone else who works at the factory are quite happy.
Customers are also happy. Even though yarn is mostly a commodity, word has spread that yarn from the factory in your town is of consistently high quality (some say it’s because of how M. Leblanc treats his workers), so manufacturers prefer your yarn to those of competitors when the price is the same. And since the price of cotton has dropped, customers are able to enjoy M. Leblanc’s cotton at a substantial discount from what they paid the previous year.
There are no shareholders as M. Leblanc is the singular owner of the factory. The lower price of cotton means increased production, leading to higher profits. M. Leblanc is a generous man. He’s endowed ten additional beds at the hospital, built two schools, paid two teachers out of his own pocket (double the meager salary they would have received from the government), and provided a fund for old and infirm laborers. Townsfolk aren’t quite sure what to make of his generosity, but compared to factory owners in other towns, he stands unrivaled.
Other towns brag that their factories bring in great amounts of money (and taxes!), but using your simple model that considers employees and customers in addition to earnings for factory owners, you know that making money isn’t all that matters. Just look at your town! Your cousins several miles away are thinking of moving to your town for better work and a better life. By all accounts, Monsieur Leblanc runs a fine, honest business that’s of benefit to himself, his employees, and his customers, not to mention the entire town.
Photo by Nancy Yang on Unsplash
An Insufficient Model
One of my goals in writing this newsletter has been to help steer us away from blindly chasing revenue and instead focus on customers. I wrote:
My point is this: all of us, whether we’re a shareholder or employee at any level within an organization, will necessarily lose focus on the customer. We’ll focus on making sure the company survives, preserving ARR, rightsizing headcount, shipping clean code, getting the support queue down to zero, closing that deal. The importance of that work, whether it actually matters, all depends on whether or not it’s meaningful to the customer.
Focusing on the customer. For our fictitious Frenchman, this model seems to fit pretty nicely. He was happily employed, customers enjoyed a quality product at a fair price, and the business owner’s profits were generously poured back into the people of the town. By all accounts within this model, everyone appeared to be focusing on what really mattered.
But that’s not the complete picture. Across the Atlantic in the United States, the most valuable commodity in 1826 was cotton. Actually, that’s not right. The most valuable American export was cotton. The most valuable commodity was Americans. Well, African Americans, those who were owned by plantation owners as slaves.
Let’s look at some numbers. The drop in price of cotton between 1825 and 1826 was driven in large part because, having been rewarded handsomely in 1825 for a national cotton export of 255 million pounds at a high average price of $0.20/lb, planters were eager to cash in on the speculation happening overseas, so they rapidly increased production to export 350 million pounds of cotton in 1826, but by that time speculation in Britain had waned (and they had excess cotton on hand), cutting the price of cotton in half to an average of $0.11/lb. It was slave labor and the forced migration of slaves from northern states to the deep south which allowed the cotton industry to grow so quickly. With approximately 1.8 million slaves in 1826 and an approximate value of $275, that places the total value of human capital at approximately $495 million, or about thirteen times the value of the total US cotton export in 1826. The size and value of the slaves would continue to grow until it reached an estimated value of $3 billion in 1860, seven times the total value of all currency in circulation in the US.
If it feels heartless to look at numbers this way, as it relates to slavery, that’s because it is heartless. “Increased production” doesn’t tell the story of black families being broken up as they’re sold on commodities markets (commodities markets!), it doesn’t tell the story of black women being raped because they’re counted as property, it doesn’t tell the stories of countless horrors committed against black men, women, and children to justify the business that slavery enabled. Numbers and formulas are insufficient at valuing human life, just as a model for business is insufficient at examining injustice to anyone who is not an employee, shareholder, or customer.
The Frenchman, I imagine, doesn’t want to pause to think about what’s happening overseas to bring cotton to his shores. It’s uncomfortable, and besides, at least the factory in his town is more ethical than neighboring towns. It’s much easier just to focus on the local system, resting in relative comfort.
Black Lives Matter
That’s where we’re at today. George Floyd was murdered at the hands of a white police officer while three other officers watched. This is only the latest injustice against black people.
So we must pause. We must let ourselves be disrupted. We must be bothered to re-examine how we arrived at where we are today and what it will take to continue healing. We can’t remain comfortable. We must remember that our nation, which was founded on freedom for all, utterly failed for its first 87 years to guarantee freedom for all as most black Americans remained enslaved. Our nation, which was founded on equality, failed for 188 years to guarantee equality for all as black Americans remained disenfranchised. Our nation, which was founded on the rule of law, is now failing to apply those laws equally when black men and women suffer unjustly at the hands of law enforcement.
Black lives matter.
Etc.
Things I’ve read/watched:
Inequality is a zero-day flaw in America’s source code, Oji Udezue, VP of Product @ Calendly
I can’t breathe, Mark Mason, CFO @ Citibank
31 Children’s books to support conversations on race, racism and resistance
Henry Louis Gates, Jr. on Why Was Cotton ‘King’?. Also catch his excellent series, The African Americans: Many Rivers to Cross, on Amazon Prime.
End notes
Rather than link out to original sources or use footnotes, I thought it might be easier to just add a few short paragraphs at the bottom.
The story of the French town is of course mostly borrowed from Victor Hugo’s Les Misérables. Jean Valjean was referred to as Father Madeleine when we owned the factory (Monsieur Leblanc was another name for him at a different part of the novel). The factory in the book made glass beads, not cotton yarn. Hugo was very much aware of the injustices embedded in the American cotton industry and slave trade, as he’s quoted later in the book: “Take away cotton is king, and what is left of America?” If you want to spend a few weeks to get your head in the space of systemic injustice, you could do worse than read Les Mis.
Financial data for the cotton trade in the 1800s taken from “The Foreign Trade of the United States from 1820 to 1840”
Napoleonic protectionism led to an increase in cotton spinning in France.
Convert historical currencies using this calculator, estimating approximately 1 USD equal to 5.2 French francs in 1826. At $0.10 would have been roughly half a franc, so at $.11/lb, that’s about 1 pound of cotton per half franc, or 2 pounds per franc.
Numbers of US Slaves came from here while the price per slave came from here.
Carry Me Back: The Domestic Slave Trade in American Life provides mind-boggling numbers on the estimated value of the slave population compared to other forms of US Wealth. It’s on Google Books. Go to page 59.
I watched the 2nd episode of The African Americans: Many Rivers to Cross to learn and be reminded of the sufferings of black men, women, and children in the United States.