Robert Ruff doesn't take the bait but does shoot straight during this VOICES episode of The Chad & Cheese Podcast. Where we talk about:
- Advertising is a distraction - Humans want the party, not the clean-up - Changing the economy - Paperless Offices - Is taking advantage of workers a bad thing? and much more.
Enjoy this Voices Series podcast from The Chad & Cheese - HR's Most Dangerous Podcast with special guest Robert Ruff, President of Sovren.
PODCAST TRANSCRIPTION sponsored by:
Morgan: Voices, we hear them every day. Some voices like mine are smooth and comforting. While on the other hand, The Chad and Cheese Podcast is like listening to a Nickelback album. You rather stab yourself in the ears with an ice pick. Anyway, y'all now listening to Voices, a podcast series from Chad and Cheese, that features the most important and influential voices within the recruitment industry. Try not to fuck it up boys.
Intro: Hide your kids, lock the doors, you're listening to HR's most dangerous podcast. Chad Sowash and Joel Cheesman are here to punch the recruiting industry right where it hurts. Complete with breaking news, brash opinion and loads of snark. Buckle up boys and girls, it's time for The Chad and Cheese Podcast.
Chad: Welcome back. We're picking the conversation back up with Robert Ruff, president of Sovren, industry veteran and all around smart dude. Okay, Robert, so have you seen this new Amazon commercial, the one where they're really trying their damnedest to shift optics away from workers pissing in garbage cans wearing haptic bracelets.
Joel: I applied for a job after seeing that ad, damn.
Chad: Have you seen this? What do you think about this? I mean, what do you think about this ad? What do you think about the optics versus reality?
Robert: Here's what I think about it. I think the clue to what's going to happen in that ad starts at the very beginning of it. At the very beginning of it, if you're really paying attention, the first five seconds, there's a guy saying, "Basically this is the world's worst place to work. They will grind you down." I'm paraphrasing there. But if you really listen to what he says, you're like, "Whoa." They kind of putting it out there and then they go into what's the advertising. I think advertising is really misunderstood and this gets into recruiting in a big way.
Robert: People advertise their weakness. There's no reason to advertise your strength, right? If you've got the lowest price, people come there because you have the lowest price, but they hate your service. They hate the clutter, they hate whatever. You have to advertise the things you're weak in and try to convince people like, "No, that's not a weakness, we're really good at that." And that's why the early days of Home Depot, when all they had was this giant warehouse full of clutter, but it was cheap. They advertised that they had great service. Well, they didn't have any service, you couldn't even check out there. But it was like, "Oh, Home Depot has great service." You knew they had great prices. If you think about Walmart, they used to advertise this made in the USA thing. Why? Because they were outsourcing everything to China. They were trying to distract you from the reality and put a different idea in your head. So that's what's going on with that Amazon commercial.
Joel: We're killing the mom and pops of America, but we have a smiley face on our sign. That's great.
Robert: Right. I mean, if you really believe that commercial, I was looking at it, I was like, "You know what? I'd love to get a master's degree. I think I'm going to go work in an Amazon warehouse for a while." Get that thing paid for.
Joel: Don't you think they're just waiting for the moment that they can just automate everything. Don't you think Bezos is just waiting for the day that he doesn't need F people do anything for Amazon?
Robert: Yeah. And I think that Amazon is one of those businesses that could almost be completely automated vertically from the top all the way down. Because the software integrates the, quote, white collar part and the blue collar part is automated by robots and you're done.
Chad: Have a nice day.
Joel: How do you see the election shaking out?
Robert: I'm just not going to take that bait.
Chad: Yeah. That's a pretty nasty bait, right?
Joel: Not touching it.
Chad: Let's not go into that just yet. Let's talk about bubbles. The last great economy we had before the bubble burst was, it was really a Mirage. I mean the reason why the bubble was so big is because we were lending money to a shit ton of people we shouldn't have been. It looked like the economy was doing incredibly well, especially in that sector. And then boom, the burst happened. How do we stop those types? Do you feel like that's where we're getting to right now? We don't have enough watchdogs to ensure that bubbles like that aren't created so that when we do have a fall, it's not this huge 2008 fall?
Robert: Well, if now I can stereotype the entire American population, I think as a population we are really immature. And what I mean by that is we only want the birthday party, no one wants to clean up afterwards. No one wants to look at the cost of the party and how hard it is to bring together. We just want to celebrate and have fun. And in our economy, we only want it to always go up. But the fact is, is that the longer it goes up, the worse the distortions are in the economy. And when it finally stops, it is going to be a much more brutal recession than it should have. Nothing goes up for forever. Yeah, it's a little scary. I wish we could just schedule it like, "Okay. Well, four days after the election, we're going to have a recession." Like, "Great, let's get it done."
Chad: We know what to do, now go ahead and start stuffing your mattress full of cash.
Robert: Right. The ironic thing is, is in the past, during a recession, cash is king. You've got cash, you can go buy things cheap. We're in an economy right now where cash is the worst asset you can have. You can't make money on your money, and that's intentional. The fed has been trying to flush money out into the economy to keep asset prices high so that people feel rich and are willing to spend more money. But that doesn't give you any cushion for when things go bad. When things go bad, it's going to be real bad.
Joel: Yeah. It sounds, a lot of things that you're sort of painting are generational, I guess challenges. You have the older folks partying and guess who gets to pay for it? The younger generation, which we talk about the okay boomer movement here on the show. Younger people not being real happy with older folks. Hearing things like, older folks as they start dying, the real estate glut that's going to happen as a result of that. Do you have any sense of whether it's workplace related or just, I don't know, life related in terms of the generational breakdowns and I guess the tensions that we're seeing these days?
Robert: Oh, I don't think that they are manufactured tensions. I think that truly the boomer generation has benefited from what they have done to the economy to benefit that generation and it's still going on. The irony is, is that it probably won't end well even for the boomers, because people are just now waking up to the fact that if you are the richest and largest cohort in America, you probably don't have anybody to sell your house to. And if that's your major asset, aren't you kind of stuck?
Robert: What's interesting is that again, there's no such thing as American real estate market. There is a collection of markets, every market is different. But I believe what you will find, that you have found for the last 10 years will be true for the next 30 or 40, is that the great places to live will become increasingly in demand. Somebody earlier maybe before we started recording mentioned Jackson Hole, Wyoming. Jackson Hole, Wyoming, is a unique place because 97% of the land is not available for development. It is in public hands or it's in conservation easements. And yet it's an incredibly beautiful place, but it's also in the middle of nowhere. It is eight hours from any major city. But yet, what you're finding is some incredibly rich people have been moving there and every time you visit Jackson Hole you're like, "Wow, that county there is either the first or second most unequal county in the United States."
Robert: Because you have billionaires moving there and then you have just blue collar people trying to hang on and they are literally having to commute an hour or from an hour away just to be able to afford a place to be able to come in and do the jobs that are needed to be done in Jackson Hole. But that distortion is going to only get worse. Because you have so many people now that can make great amounts of wealth without ever stepping into an office or getting on an airplane. And what that means is, is that these places that are highly desirable are going to become even more desirable.
Chad: That's the big key, right? So accelerating inequality. And if you have three houses and two boats, who the hell do you sell them to? And then on the other side of this equation, we have individuals who are working two to three jobs, maybe a side hustle or what have you, to make enough money where they live to be able to keep food in the kids' mouths. So that inequality does matter. How do we ... I mean, other than going, and maybe it is, maybe we go to the extreme of, hey, we've got to do this radical Elizabeth Warren type of thing where we just tax the shit out of the top one of the 1%. I mean, how do you fix something like this, where you do have this much inequality?
Joel: When did the pitchforks come out?
Robert: Well, I think that the inequality is, if you look at the one single thing that has distorted this country's politics and economics for 40 years, it is taxes. I am a business owner and you would think that I would have the opposite view that I have on taxes. I believe that the tax rates that we had back in the 60s and the 50s were the reason we had a strong economy. We had punitive tax rates. Once you made good money and you started making great money, you didn't have a way to keep that money. Some of the marginal tax rates were actually as high as 90% and the typical top tax rate was over 70%. And what that meant for a business owner like me is once I've made a good pile of money, if I make another pile on top of that, I get to keep about 10% or 20% of that. Why would I want to make that money and just give most of it, the vast amount of it to the government?
Robert: What business owners would do is they'd look around and say, "How can I invest in my employees? How can I invest in more training? How can I build another plant? So that I don't have to give them money in taxes." But now if I make X dollars or a hundred times X dollars, my tax rate might actually go down effectively, the more money I make. That's the crazy part about it. And there's no incentive for me to not just say, "Well, it's all mine now. I'm just going to keep it." Because it doesn't really cost me anything at that point to be self-centered.
Robert: Back in the 50s and 60s, there was a real cost to being self-centered with huge amounts of money. The government was going to basically take it out of your hands. And that made the economy fairer because people had to take care of their employees because it wouldn't just, it did not benefit them to just pay huge taxes, take a little slice of it and put it in the bank. You could make a bigger return by investing in your people and your plant and equipment, than you could paying taxes.
Chad: But we look at those days, and from that standpoint, having a strong economy, we look at today as having a strong economy and we try to equate those two economies to being, I mean the same. But they're entirely different from the standpoint of inequality. I mean from our ... like I had said, what needs to happen is we have to really take a radical look and everybody's saying that there are all these radical people out there that just want to take money. It's like, "No, this is not about taking money. This is about ensuring that everybody can actually live, have healthcare, be healthy, all these other things that we thought America actually meant. But it doesn't really mean that today."
Robert: Look, the health of any real nation is in its middle class. You have a thriving middle class, you have a real country. You have no middle class or a dying middle class and we call those third world nations. The absence of a healthy middle class in this country necessarily means that for the vast majority of people the game is over. Because by damage of the 1% is the 1%.
Joel: Any views on universal basic income?
Chad: Yeah, UBI.
Robert: Well, you guys keep baiting me into, I'm becoming America's most hated business owner. But I am truly believing that there is nothing moral about capitalism or immoral about socialism. These are just different ways to organize the world and we should be looking at what makes this sustainable. And truly, if all of the resources are owned by the 1% who then don't need the 99% to make even more money because they've automated it, softwarized it, and whatever else they do to take people out of the equation.
Chad: Bezos plan.
Robert: Yeah. What's left? There's nothing left for the 99%. And so I think to a certain extent the seeds of its own destruction are in there. And you want to talk about, with Elizabeth Warren, the wealth tax. I think the wealth tax makes perfect sense. Here's why. I bet both of y'all own your own houses.
Robert: You pay a wealth tax every year. The taxing authorities look at, I think your house is worth $700,000, you have to pay me this tax to keep that house next year. That's a wealth tax, just happens to be that we decided that wealth taxes should be on the things that you have to have for living like a house. But why isn't there a wealth tax on your cash and your bonds and your stock investments and stuff like that? Why is it that the thing that you have to have to live is the only thing that we tax from a wealth tax standpoint?
Robert: And what Elizabeth Warren is saying is like, "Yeah, these rich people can actually ... If all the people in the world who can afford to pay more, wouldn't it be the people that have the 90% of the resources?" Sure. I just don't have a problem with it.
Joel: You have an interesting sort of corporate structure. You mentioned people living in different areas and sort of in places that are in demand. Just for those who don't know, you have sort of a fairly interesting, I guess would you call it virtual corporate structure?
Robert: We do. Every employee in Sovren works out of their house, no matter where they are in the country.
Joel: No offices.
Robert: No offices.
Robert: Okay. People always talked about for a while the paperless office, right? When we were back in the 90s, that was kind of a big deal. Sovren is truly a paperless office. We don't have a physical office. We don't have a corporate network. We don't have any real estate or fixed assets. Literally the company only exist in the virtual world.
Joel: Are there cons to that or is it all gravy?
Robert: Well, there's a reason why it's organized that way. We're in knowledge worker business, right? IT. IT is the greatest business in the world for, do not snip this out and use this as a standalone quote. It's the greatest business in the world for exploiting your workers the best possible way. Here's what I mean by that. When I hire people, I explain to them that they can expect to make great money working here, but I will never pay them what they're worth. And you get this weird look like, "Wait, what?"
Robert: And what I'm explaining to them in that conversation is, if I have a dollar and I give it to you and you make me a dollar and give it back, what was the point of that transaction? Literally, I'm going to give you a dollar and I want you to find a way to give me back $2. The whole reason I'm hiring you is to have you do something that will make more money than what I'm paying you. If you look at like, "Hey, I made this company X hundreds of thousands of dollars last year." You're like, "Yeah, but that's why we hired you." You're not going to get that as your pay.
Robert: But here's the cool thing, in IT you can hire people that are literally 10 times or a hundred times in some cases more productive than the average person that they are in their cohort. And you can pay them two or three times what the average person makes. They will never leave and you have still made fantastic money with those people assets. It is not possible in other industries. So let's just say that I'm an, I had a father-in-law who was in the painting business, commercial painting contractor. His best painter was 10% faster than his worst painter. You can't hire guys like, "Hey, that guy painted three houses a day all by himself." It's not going to happen. But you can literally hire programmers who are
Joel: That’s much better.
Robert: 10 times. Easily, 10 times better. Is that the average programmer? No, you want to avoid average people in this business. That's why Sovren is organized virtually. Because if I were to say, everybody has to come into an office, now there is a geographic radius that you can draw around that office that you have to select your people from. I don't want the best people in that radius. I want the best people in the continent of United States, or maybe even outside of the United States. And by doing that, then I am sure that I am really getting those people that can give 10 times or a hundred times. Now, the challenge of it is it's very easy when you're not being spied on and nitpicked to become 1% lazier every day and never even realize that like, you know you're not supposed to be playing golf on Tuesday all day.
Joel: That flies in the face of a lot of companies now that are just really preaching engagement and creating really long surveys and making extra time for both employees and the execs in the business. It sounds like you found an easier way that's not a burden on everybody.
Robert: Well, I don't think that great people are going to subject themselves to bad employment practices. We hire professionals and here's what we tell them, "We want your 40 most productive hours of the week." I didn't say that I wanted you to work five, eight hours days from 8:00 to 5:00 or something like that. I literally want your 40 most productive hours, and I actually do not want 65 hours from you. We had an employee that was working probably 65 or 70 hours a week and we didn't feel like the guy was really performing. And so we spent a lot of time trying to understand what are you spending your time on and why are you doing that? And it came down to, we felt like he was doing a tremendous amount of busy work to comfort himself that he wasn't leaving anything undone. But he wasn't doing work productively.
Robert: We found the major thing that he was using as a tool to waste time, in our opinion waste time, not in his opinion. We literally took that tool away from him. We deleted it off of our system and said, "It's gone." We had to sit down and hold his hand and say, "You are going to burn out." And he had already gone through the stress of being a workaholic, which ruined a previous relationship that he had. And so he kind of knew in the back of his head, this isn't healthy, but he didn't know how to get out of it. We took the tool away from him and then we told him, "You're only allowed to use this one tool and this is what we want to see out of it every day." We have found that this person is now working 40 hours a week and we have measured their productivity because this person is responsible for actually producing something. They are about, they're a little less than 10% more productive than when they were working 65 hours.
Chad: Look for more episodes of Voices. This Chad and Cheese podcast series devoted the stories and opinions of industry leaders. Subscribe on iTunes, Google Podcasts or wherever you get your podcasts, so you don't miss a single show. For more, visit chadcheese.com.