Family Businesses Have Trained the Majority of Americans to Tolerate Autocracy
or, increasingly, flee to self-employment
Have you ever wondered why the Family and Medical Leave Act and similar federal regulatory controls on private businesses always exclude companies like Orange County Choppers? Companies with less than fifty employees?
Because most of these small businesses are family-owned and family-run, and America retains a profound cultural and legislative sympathy for the family business owner and their profit struggles. So we don’t place expensive compliance burdens on small businesses.1 This sympathy originated in our settler period and its far-flung quilt of family farmers. It morphed into sympathy for the early 19th-century cottage manufacturer and, in the 20th century, into sympathy for the local tradesperson, shopkeeper, and modern service provider. The family-run small retail business (dry cleaning, convenience store, restaurant, etc.) is how many immigrants still climb out of poverty - a mythic American ladder to the middle class. Most family-owned businesses do not profit much after salaries, taxes, and debts are paid. Single-location retail and restaurants are the worst small businesses to run if profit is your aim. These family businesses are primarily about people surviving.
It is no coincidence at all that Donald Trump, the epitome of a family business autocrat, pushed for and signed a Republican-led bill called - the Tax Cuts and Jobs Act of 2017. Although the primary goal was to slash federal taxes on corporations from 35% to 21%, benefiting himself, Republicans also inserted another tax break for small businesses that are not S-corps or partnerships. The qualified business income deduction for pass-through LLC small businesses (i.e., those with a single owner and no partnership or shares) remains a huge win for millions of family-run businesses, even self-employed businesspeople like myself.2
Corporate lawyers, accountants, and the Internal Revenue Service are the folks most suspicious of small, family businesses. The opening scene from Everything Everywhere All At Once perfectly conveys their shared ‘concern.’
And then there’s me. I really can’t stand family businesses (unless it’s mine). The reason is as simple as this - I’ve never met a family business owner who would work for themselves as an employee. Have you? This is the tragic irony of how family businesses tend to work. And it has set us up as citizens to rationalize away a tyrant anywhere in our lives, even in the White House.
I’ve worked twice for family-owned companies. Not working for one is hard to pull off in the United States. 62% of Americans work in family-owned private companies, mostly very small. A larger % has most likely worked for at least one in their lives; I simply don’t have the data as I write this.
I first experienced a family company work environment in the summers of 1988-1990. The second time lasted fifteen years— precisely ten years too long. I am not suited for family company life as an outsider. I don’t admire owner-tyrants. They train us to see micro-autocracy, rather than employee ownership, as the norm in American capitalism. They are low-trust leaders for the most part. They tend toward micro-managing execution long after they need to be doing this.
My Immersion Into Family Company Dynamics
In the late 1980s, I spent my summers working at a coastal Maine grocery store with an upscale seasonal clientele. This store switched its merchandising each year on Memorial Day to cater to upper-middle-class vacation homeowners and, of course, the “boat people” — the local Mainer reference for wealthy sailboat and yacht owners mooring for a few days in the bay nearby. The store's beer section would literally double its item count to make room for expensive imported beers like St. Pauli’s Girl, Heineken, and Newcastle Brown Ale.
The store owner was a classic silent generation patriarch, well-loved by his customers and most locals. He was one of the rich guys in town and drove a Saab turbo. For a Mainer, he had excellent social skills and could charm the rich ‘summer folk.’ He knew most of their names, including my parents’ names. These were the people who, in four months, generated almost all of his store’s annual profit.
Internally, though, with his staff, our family patriarch displayed prevalent anti-social behaviors for a man of his generation:
Prone to anger at the tiniest of newb mistakes.
Little interest in praising people
Not much interest in training people
And otherwise presenting an intimidating workaholic front.
He ran the store his way, and it worked for his customers. For the latter, it prevented a long trip up the peninsula to find decent produce and meat elsewhere. Honestly, he offered a Whole Foods-grade fresh food experience long before anyone in New England knew what that even was outside of a lobster pound or a roadside berry stand. There was no real reason for employees to question his operating model. So, I certainly didn’t.
His priorities? Customers first, owner second, employees last. This is how traditional, well-run family businesses operate. The shitty ones put the owner ahead of the customers. Never find yourself working in one of these. Ever. These are the ones the IRS worries about. Every opportunity is just an excuse to put cash in the kitty.
Back to my high school summer job. Running a grocery store, even a 5,000-square-foot one, is a ton of work, so I did respect the patriarch’s work ethic. He worked 12-hour days. Sometimes longer. He speed-walked everywhere. The standard was high. My shift was only eight hours - 10 AM-6 PM (closing). I walked at a normal teenage pace. I deserved subordinate status.
But the yelling was unnecessary. The public castigations in front of other employees in the back room were also unnecessary. Blaming high school kids for procedures you didn’t think through, which took us off the floor for too long (e.g., catering to some middle-aged male ass-hole who pulled up with a pickup truck full of thousands of beer cans for recycling redemption). The yelling, bloviating, and chest-beating were simply male prerogatives widely shared at the time. And it continues to this day in many family businesses. It is the prerogative of ownership itself - to treat employees like children, to subject them to your mood swings, largely unfiltered. To feel no responsibility for how you interact with subordinates.
By the beginning of my second summer in that Maine grocery store, I knew how to manage the store owner and avoid his ire. I was also probably a better employee. I got pretty damn good with a retail pricing gun. I was also very good at picking up cigarette butts from the entrance area and parking lot(s). I could locate the smallest crushed white stub in that grey/white gravel with my photographer’s eye for detail. I think that was one of the rare times I got high praise from the old man. I implicitly knew the Nieman Marcus hygiene standard he was trying to set because it was aimed at ‘summer people’ like my parents. But, dammit! I wanted to be praised for pricing twelve boxes of Honey Nut Cheerios in 15 seconds flat with that f*cking pricing gun! I had mad stockboy skills!
Although the owner did employ his son and grandson, his most trusted employee was not a family member. The man he relied upon to keep the store running was a local guy - Walt- from outside his kin network. Walt was the head of operations and managed the stockboys (me) and cashiers. I have never seen anyone manually check out large boat orders as fast as Walt did without a laser barcode scanner. He didn’t need to look at the cash register keyboard as he typed. His right hand tapped into pricing while his head scanned each item, and his left hand whipped it by in a fraction of a second. It was some kind of Jedi cashier trick. And Walt was also the only one who would stand up to the owner when he was being an asshole with us. Interestingly, the patrilineal descendants did not stand up to him. But it is unsurprising in a family company where the patriarch is genuinely intimidating.
As I mentioned, most Americans work in someone else’s family business. And although some of these companies are small, several are significant, like Fox News’s parent company or Mars (the candy giant).
Like my old manager Walt, employees outside the family have an outsider perspective in family-owned businesses. And they don’t ever really lose it. This perspective remains the primary reason non-family employees can quit and challenge the family owners much more easily. For us, the job is a relationship we can permanently exit without much lingering consequence, even if the salary temporarily keeps us stuck. Family members suffer much more drama when they quit and take off.
The Ease With Which We Accommodate Tyrant Owners
What’s fascinating is how, as a non-family employee, you can quickly accommodate the anti-social behavior of small business owner-tyrants. The initial shock is the yelling, badgering, and bullying common to many family members in these businesses.
The penchant for verbal abuse, condescension, and disrespect is a plague among male-dominated family businesses. This is especially true when enraged owners blindside employees while busy doing something else. This behavior does not have to be that frequent to create a low level of anxiety in the entire workplace (remote or on-site). For non-family employees with anxiety disorders, these workplaces are usually a horrible fit. You never quite know where you stand, but you know you are not comfortably ‘in the family.’ In family-run companies like those I’ve worked in, there is often too much chaos, too much royal catering to the owners, and too much ‘court intrigue’ to manage on top of your ‘professional’ duties.
Employees seeking an ambitious, achievement-oriented career do not do well in small, family businesses. They may be OK with politics at work. But not with chaos, poor communications, and sycophantic pandering to the owner. What these ‘crazy’ moderns seek is a rational, ordered system in which to work. A system that follows impersonal rules and pursues business objectives. Gasp! What entitlement! Professionals with career ambition have no problem with hierarchy either. They just do not want to work inside business functions trying to execute per the poorly communicated whims and moods of a childish family owner or owners.
What is most damaging in so many family companies is the tacit disrespect toward subordinate employees and non-family executives. Keeping them out of critical decisions. Talking about their task suite in front of them as if they are not even there. Then there is the unwillingness to have a professional argument with non-family employees about significant decisions to achieve productive compromise across the owner/employee divide, or, as Jeff Bezos would say, ‘to disagree and commit.’
Instead, there are ‘fake meetings’ without real debate, argument, or discussion. The owner(s) dominate the conversation and make the decisions unilaterally, with no stakeholder voting or, even worse, privately offline. And I can’t forget to mention the phenomenon of ‘sacred cows’ or just plain ‘carrying incompetent family members’ as employees. Family business dynamics are demoralizing, demotivating, and undemocratic. Non-family employees stay for the paycheck, for the stability of ‘what is known,’ or for lack of any known alternatives.
Professionally mature disagreement and executive collaboration are things you learn inside specific professional worlds, primarily law, consulting, teaching, public companies, and some political bodies. It is highly unnatural to debate and work like this in most cultures. It is not day-to-day behavior most people can muster. This is why civic institutions in pre-modern agrarian societies like the village panchayat in India or the New England town council depended on members selected for their level-headedness, rationality, and overall sagacity. The town drunks were implicitly kept out. So were the goofballs.
In the eerily accurate words of Harvard political scientists Levitsky and Ziblatt:
Democracy is grinding work. Whereas family businesses and army squadrons may be ruled by fiat, democracies require negotiation, compromise, and concessions. 3
I detest most family companies because some have good owners, but they perpetuate labor practices based on the absurd, largely unregulated, social privilege of at-will employment. Whatever generosity they muster is purely conditional, leaving you, the employee, no real sense of security without currying the favor of the owners directly. The family owners are not even required to update you on your relationship status, so you might have a head start looking for something else.
You are always expendable and have no say in how profits get distributed to employees, even if you are an executive. The invisible barrier between family and non-family is anti-modern and demeaning in a modern workforce. It also trains us to placate tyrants when we should send them to society's margins or at least to HR.
In an ideal world, perhaps, we would ALL be self-employed in large, undulating networks facilitated by Stripe. Until then…most Americans have to deal with Papa John.
The 1992 Americans With Disabilities Act was a rare piece of legislation that even affects businesses serving the public in person regardless of their size.
20% off your Schedule C taxable income pays for your payroll or self-employment taxes and more. It makes self-employment very attractive to professionals like myself.
Steven Levinsky and Daniel Ziblatt, How Democracies Die, New York: Broadway Books, 2018. p. 77.
My experiences working for family businesses, especially those owned by Jewish men, runs completely counter to what you have written. The last thing we should do is to let centralized government make “one size fits all” decisions for everyone. Why not just go live in Russia or China? 🤨
I've worked as the outsider in four family businesses and have been the family in one. Out of those five cases, three of them were ideal. All major decisions were made in-family, but the work environment was excellent and the pay was good.
I've also worked for a couple of petty tyrants, and it's exactly as you describe, so I appreciate the screed.
I just think it's more of a mixed bag (and that very similar dynamics can for within large, impersonal firms.)