On 8 June, a Scottish banker named Alexander Fordyce shorted the collapsing Company’s shares in the London markets. But a momentary bounce-back in the stock ruined his plans, and he skipped town leaving £550,000 in debt. Much of this was owed to the Ayr Bank, which imploded. In less than three weeks, another 30 banks collapsed across Europe, bringing trade to a standstill. On July 15, the directors of the Company applied to the Bank of England for a £400,000 loan. Two weeks later, they wanted another £300,000. By August, the directors wanted a £1 million bailout. The news began leaking out and seemingly contrite executives, running from angry shareholders, faced furious Parliament members. By January, the terms of a comprehensive bailout were worked out, and the British government inserted its czars into the Company’s management to ensure compliance with its terms.
If this sounds eerily familiar, it shouldn’t. The year was 1772, exactly 239 years ago today, the apogee of power for the corporation as a business construct. The company was the British East India company (EIC). The bubble that burst was the East India Bubble. Between the founding of the EIC in 1600 and the post-subprime world of 2011, the idea of the corporation was born, matured, over-extended, reined-in, refined, patched, updated, over-extended again, propped-up and finally widely declared to be obsolete. Between 2011 and 2100, it will decline — hopefully gracefully — into a well-behaved retiree on the economic scene.
In its 400+ year history, the corporation has achieved extraordinary things, cutting around-the-world travel time from years to less than a day, putting a computer on every desk, a toilet in every home (nearly) and a cellphone within reach of every human. It even put a man on the Moon and kinda-sorta cured AIDS.
So it is a sort of grim privilege for the generations living today to watch the slow demise of such a spectacularly effective intellectual construct. The Age of Corporations is coming to an end. The traditional corporation won’t vanish, but it will cease to be the center of gravity of economic life in another generation or two. They will live on as religious institutions do today, as weakened ghosts of more vital institutions from centuries ago.
It is not yet time for the obituary (and that time may never come), but the sun is certainly setting on the Golden Age of corporations. It is time to review the memoirs of the corporation as an idea, and contemplate a post-corporate future framed by its gradual withdrawal from the center stage of the world’s economic affairs.
Framing Modernity and Globalization
For quite a while now, I have been looking for the right set of frames to get me started on understanding geopolitics and globalization. For a long time, I was misled by the fact that 90% of the available books frame globalization and the emergence of modernity in terms of the nation-state as the fundamental unit of analysis, with politics as the fundamental area of human activity that shapes things. On the face of it, this seems reasonable. Nominally, nation-states subsume economic activity, with even the most powerful multi-national corporations being merely secondary organizing schemes for the world.
But the more I’ve thought about it, the more I’ve been pulled towards a business-first perspective on modernity and globalization. As a result, this post is mostly woven around ideas drawn from five books that provide appropriate fuel for this business-first frame. I will be citing, quoting and otherwise indirectly using these books over several future posts, but I won’t be reviewing them. So if you want to follow the arguments more closely, you may want to read some or all of these. The investment is definitely worthwhile.
- The Corporation that Changed the World by Nick Robins, a history of the East India Company, a rather unique original prototype of the idea
- Monsoon by Robert Kaplan, an examination of the re-emergence of the Indian Ocean as the primary theater of global geopolitics in the 21st century
- The Influence of Sea Power Upon History: 1660-1783 by Alfred Thayer Mahan, a classic examination of how naval power is the most critical link between political, cultural, military and business forces.
- The Post-American World by Fareed Zakaria, an examination of the structure of the world being created, not by the decline of America, but by the “rise of the rest.”
- The Lever of Riches by Joel Mokyr, probably the most compelling model and account of how technological change drives the evolution of civilizations, through monotonic, path-dependent accumulation of changes
I didn’t settle on these five lightly. I must have browsed or partly-read-and-abandoned dozens of books about modernity and globalization before settling on these as the ones that collectively provided the best framing of the themes that intrigued me. If I were to teach a 101 course on the subject, I’d start with these as required reading in the first 8 weeks.
The human world, like physics, can be reduced to four fundamental forces: culture, politics, war and business. That is also roughly the order of decreasing strength, increasing legibility and partial subsumption of the four forces. Here is a visualization of my mental model:
Culture is the most mysterious, illegible and powerful force. It includes such tricky things as race, language and religion. Business, like gravity in physics, is the weakest and most legible: it can be reduced to a few basic rules and principles (comprehensible to high-school students) that govern the structure of the corporate form, and descriptive artifacts like macroeconomic indicators, microeconomic balance sheets, annual reports and stock market numbers.
But one quality makes gravity dominate at large space-time scales: gravity affects all masses and is always attractive, never repulsive. So despite its weakness, it dominates things at sufficiently large scales. I don’t want to stretch the metaphor too far, but something similar holds true of business.
On the scale of days or weeks, culture, politics and war matter a lot more in shaping our daily lives. But those forces fundamentally cancel out over longer periods. They are mostly noise, historically speaking. They don’t cause creative-destructive, unidirectional change (whether or not you think of that change as “progress” is a different matter).
Business though, as an expression of the force of unidirectional technological evolution, has a destabilizing unidirectional effect. It is technology, acting through business and Schumpeterian creative-destruction, that drives monotonic, historicist change, for good or bad. Business is the locus where the non-human force of technological change sneaks into the human sphere.
Of course, there is arguably some progress on all four fronts. You could say that Shakespeare represents progress with respect to Aeschylus, and Tom Stoppard with respect to Shakespeare. You could say Obama understands politics in ways that say, Hammurabi did not. You could say that General Petraeus thinks of the problems of military strategy in ways that Genghis Khan did not. But all these are decidedly weak claims.
On the other hand the proposition that Facebook (the corporation) is in some ways a beast entirely beyond the comprehension of an ancient Silk Road trader seems vastly more solid. And this is entirely a function of the intimate relationship between business and technology. Culture is suspicious of technology. Politics is mostly indifferent to and above it. War-making uses it, but maintains an arms-length separation. Business? It gets into bed with it. It is sort of vaguely plausible that you could switch artists, politicians and generals around with their peers from another age and still expect them to function. But there is no meaningful way for a businessman from (say) 2000 BC to comprehend what Mark Zuckerberg does, let alone take over for him. Too much magical technological water has flowed under the bridge.
Arthur C. Clarke once said that any sufficiently advanced technology is indistinguishable from magic, but technology (and science) aren’t what create the visible magic. Most of the magic never leaves journal papers or discarded engineering prototypes. It is business that creates the world of magic, not technology itself. And the story of business in the last 400 years is the story of the corporate form.
There are some who treat corporate forms as yet another technology (in this case a technology of people-management), but despite the trappings of scientific foundations (usually in psychology) and engineering synthesis (we speak of organizational “design”), the corporate form is not a technology. It is the consequence of a social contract like the one that anchors nationhood. It is a codified bundle of quasi-religious beliefs externalized into an animate form that seeks to preserve itself like any other living creature.
The Corporate View of history: 1600 – 2100
We are not used to viewing world history through the perspective of the corporation for the very good reason that corporations are a recent invention, and instances that had the ability to transform the world in magical ways did not really exist till the EIC was born. Businesses of course, have been around for a while. The oldest continuously surviving business, until recently, was Kongo Gumi, a Japanese temple construction business founded in 584 AD that finally closed its doors in 2009. Guilds and banks have existed since the 16th century. Trading merchants, who raised capital to fund individual ships or voyages, often with some royal patronage, were also not a new phenomenon. What was new was the idea of a publicly traded joint-stock corporation, an entity with rights similar to those of states and individuals, with limited liability and significant autonomy (even in its earliest days, when corporations were formed for defined periods of time by royal charter).
This idea morphed a lot as it evolved (most significantly in the aftermath of the East India Bubble), but it retained a recognizable DNA throughout. Many authors such as Gary Hamel (The Future of Management), Tom Malone (The Future of Work) and Don Tapscott (Wikinomics) have talked about how the traditional corporate form is getting obsolete. But in digging around, I found to my surprise that nobody has actually attempted to meaningfully represent the birth-to-obsoloscence evolution of the idea of the corporation.
Here is my first stab at it (I am working on a much more detailed, data-driven timeline as a side project):
To understand history — world history in the fullest sense, not just economic history — from this perspective, you need to understand two important points about this evolution of corporations.
The Smithian/Schumpeterian Divide
The first point is that the corporate form was born in the era of Mercantilism, the economic ideology that (zero-sum) control of land is the foundation of all economic power.
In politics, Mercantilism led to balance-of-power models. In business, once the Age of Exploration (the 16th century) opened up the world, it led to mercantilist corporations focused on trade (if land is the source of all economic power, the only way to grow value faster than your land holdings permit, is to trade on advantageous terms).
The forces of radical technological change — the Industrial Revolution — did not seriously kick in until after nearly 200 years of corporate evolution (1600-1800) in a mercantilist mold. Mercantilist models of economic growth map to what Joel Mokyr calls Smithian Growth, after Adam Smith. It is worth noting here that Adam Smith published The Wealth of Nations in 1776, strongly influenced by his reading of the events surrounding the bursting of the East India Bubble in 1772 and debates in Parliament about its mismanagement. Smith was both the prophet of doom for the Mercantilist corporation, and the herald of what came to replace it: the Schumpeterian corporation. Mokyr characterizes the growth created by the latter as Schumpeterian growth.
The corporate form therefore spent almost 200 years — nearly half of its life to date — being shaped by Mercantilist thinking, a fundamentally zero-sum way of viewing the world. It is easy to underestimate the impact of this early life since the physical form of modern corporations looks so different. But to the extent that organizational forms represent externalized mental models, codified concepts and structure-following-strategy (as Alfred Chandler eloquently put it), the corporate form contains the inertia of that early formative stage.
In fact, in terms of the two functions that Drucker considered the only essential ones in business, marketing and innovation, the Mercantilist corporation lacked one. The archetypal Mercantilist corporation, the EIC, understood marketing intimately and managed demand and supply with extraordinary accuracy. But it did not innovate.
Innovation was the function grafted onto the corporate form by the possibility of Schumpeterian growth, but it would take nearly an entire additional century for the function to be properly absorbed into corporations. It was not until after the American Civil War and the Gilded Age that businesses fundamentally reorganized around (as we will see) time instead of space, which led, as we will see, to a central role for ideas and therefore the innovation function.
The Black Hills Gold Rush of the 1870s, the focus of the Deadwood saga, was in a way the last hurrah of Mercantilist thinking. William Randolph Hearst, the son of gold mining mogul George Hearst who took over Deadwood in the 1870s, made his name with newspapers. The baton had formally been passed from mercantilists to schumpeterians.
This divide between the two models can be placed at around 1800, the nominal start date of the Industrial Revolution, as the ideas of Renaissance Science met the energy of coal to create a cocktail that would allow corporations to colonize time.
Reach versus Power
The second thing to understand about the evolution of the corporation is that the apogee of power did not coincide with the apogee of reach. In the 1780s, only a small fraction of humanity was employed by corporations, but corporations were shaping the destinies of empires. In the centuries that followed the crash of 1772, the power of the corporation was curtailed significantly, but in terms of sheer reach, they continued to grow, until by around 1980, a significant fraction of humanity was effectively being governed by corporations.
I don’t have numbers for the whole world, but for America, less than 20% of the population had paycheck incomes in 1780, and over 80% in 1980, and the percentage has been declining since (I have cited these figures before; they are from Gareth Morgan’s Images of Organization and Dan Pink’s Free Agent Nation). Employment fraction is of course only one of the many dimensions of corporate power (which include economic, material, cultural, human and political forms of power), but this graph provides some sense of the numbers behind the rise and fall of the corporation as an idea.
It is tempting to analyze corporations in terms of some measure of overall power, which I call “reach.” Certainly corporations today seem far more powerful than those of the 1700s, but the point is that the form is much weaker today, even though it has organized more of our lives. This is roughly the same as the distinction between fertility of women and population growth: the peak in fertility (a per-capita number) and peak in population growth rates (an aggregate) behave differently.
To make sense of the form, the divide between the Smithian and Schumpeterian growth epochs is much more useful than the dynamics of reach. This gives us a useful 3-phase model of the history of the corporation: the Mercantilist/Smithian era from 1600-1800, the Industrial/Schumpeterian era from 1800 – 2000 and finally, the era we are entering, which I will dub the Information/Coasean era. By a happy accident, there is a major economist whose ideas help fingerprint the economic contours of our world: Ronald Coase.
This post is mainly about the two historical phases, and are in a sense a macro-prequel to the ideas I normally write about which are more individual-focused and future-oriented.
I: Smithian Growth and the Mercantilist Economy (1600 – 1800)
The story of the old corporation and the sea
It is difficult for us in 2011, with Walmart and Facebook as examples of corporations that significantly control our lives, to understand the sheer power the East India Company exercised during its heyday. Power that makes even the most out-of-control of today’s corporations seem tame by comparison. To a large extent, the history of the first 200 years of corporate evolution is the history of the East India Company. And despite its name and nation of origin, to think of it as a corporation that helped Britain rule India is to entirely misunderstand the nature of the beast.
Two images hint at its actual globe-straddling, 10x-Walmart influence: the image of the Boston Tea Partiers dumping crates of tea into the sea during the American struggle for independence, and the image of smoky opium dens in China. One image symbolizes the rise of a new empire. The other marks the decline of an old one.
The East India Company supplied both the tea and the opium.
At a broader level, the EIC managed to balance an unbalanced trade equation between Europe and Asia whose solution had eluded even the Roman empire. Massive flows of gold and silver from Europe to Asia via the Silk and Spice routes had been a given in world trade for several thousand years. Asia simply had far more to sell than it wanted to buy. Until the EIC came along
A very rough sketch of how the EIC solved the equation reveals the structure of value-addition in the mercantilist world economy.
The EIC started out by buying textiles from Bengal and tea from China in exchange for gold and silver.
Then it realized it was playing the same sucker game that had trapped and helped bankrupt Rome.
Next, it figured out that it could take control of the opium industry in Bengal, trade opium for tea in China with a significant surplus, and use the money to buy the textiles it needed in Bengal. Guns would be needed.
As a bonus, along with its partners, it participated in yet another clever trade: textiles for slaves along the coast of Africa, who could be sold in America for gold and silver.
For this scheme to work, three foreground things and one background thing had to happen: the corporation had to effectively take over Bengal (and eventually all of India), Hong Kong (and eventually, all of China, indirectly) and England. Robert Clive achieved the first goal by 1757. An employee of the EIC, William Jardine, founded what is today Jardine Matheson, the spinoff corporation most associated with Hong Kong and the historic opium trade. It was, during in its early history, what we would call today a narco-terrorist corporation; the Taliban today are kindergarteners in that game by comparison. And while the corporation never actually took control of the British Crown, it came close several times, by financing the government during its many troubles.
The background development was simpler. England had to take over the oceans and ensure the safe operations of the EIC.
Just how comprehensively did the EIC control the affairs of states? Bengal is an excellent example. In the 1600s and the first half of the 1700s, before the Industrial Revolution, Bengali textiles were the dominant note in the giant sucking sound drawing away European wealth (which was flowing from the mines and farms of the Americas). The European market, once the EIC had shoved the Dutch VOC aside, constantly demanded more and more of an increasing variety of textiles, ignoring the complaining of its own weavers. Initially, the company did no more than battle the Dutch and Portuguese on water, and negotiate agreements to set up trading posts on land. For a while, it played by the rules of the Mughal empire and its intricate system of economic control based on various imperial decrees and permissions. The Mughal system kept the business world firmly subservient to the political class, and ensured a level playing field for all traders. Bengal in the 17th and 18th centuries was a cheerful drama of Turks, Arabs, Armenians, Indians, Chinese and Europeans. Trade in the key commodities, textiles, opium, saltpeter and betel nuts, was carefully managed to keep the empire on top.
But eventually, as the threat from the Dutch was tamed, it became clear that the company actually had more firepower at its disposal than most of the nation-states it was dealing with. The realization led to the first big domino falling, in the corporate colonization of India, at the battle of Plassey. Robert Clive along with Indian co-conspirators managed to take over Bengal, appoint a puppet Nawab, and get himself appointed as the Mughal diwan (finance minister/treasurer) of the province of Bengal, charged with tax collection and economic administration on behalf of the weakened Mughals, who were busy destroying their empire. Even people who are familiar enough with world history to recognize the name Robert Clive rarely understand the extent to which this was the act of a single sociopath within a dangerously unregulated corporation, rather than the country it was nominally subservient to (England).
This history doesn’t really stand out in sharp relief until you contrast it with the behavior of modern corporations. Today, we listen with shock to rumors about the backroom influence of corporations like Halliburton or BP, and politicians being in bed with the business leaders in the Too-Big-to-Fail companies they are supposed to regulate.
The EIC was the original too-big-to-fail corporation. The EIC was the beneficiary of the original Big Bailout. Before there was TARP, there was the Tea Act of 1773 and the Pitt India Act of 1783. The former was a failed attempt to rein in the EIC, which cost Britain the American Colonies. The latter created the British Raj as Britain doubled down in the east to recover from its losses in the west. An invisible thread connects the histories of India and America at this point. Lord Cornwallis, the loser at the Siege of Yorktown in 1781 during the revolutionary war, became the second Governor General of India in 1786.
But these events were set in motion over 30 years earlier, in the 1750s. There was no need for backroom subterfuge. It was all out in the open because the corporation was such a new beast, nobody really understood the dangers it represented. The EIC maintained an army. Its merchant ships often carried vastly more firepower than the naval ships of lesser nations. Its officers were not only not prevented from making money on the side, private trade was actually a perk of employment (it was exactly this perk that allowed William Jardine to start a rival business that took over the China trade in the EIC’s old age). And finally — the cherry on the sundae — there was nothing preventing its officers like Clive from simultaneously holding political appointments that legitimized conflicts of interest. If you thought it was bad enough that Dick Cheney used to work for Halliburton before he took office, imagine if he’d worked there while in office, with legitimate authority to use his government power to favor his corporate employer and make as much money on the side as he wanted, and call in the Army and Navy to enforce his will. That picture gives you an idea of the position Robert Clive found himself in, in 1757.
He made out like a bandit. A full 150 years before American corporate barons earned the appellation “robber.”
In the aftermath of Plassey, in his dual position of Mughal diwan of Bengal and representative of the EIC with permission to make money for himself and the company, and the armed power to enforce his will, Clive did exactly what you’d expect an unprincipled and enterprising adventurer to do. He killed the golden goose. He squeezed the Bengal textile industry dry for profits, destroying its sustainability. A bubble in London and a famine in Bengal later, the industry collapsed under the pressure (Bengali economist Amartya Sen would make his bones and win the Nobel two centuries later, studying such famines). With industrialization and machine-made textiles taking over in a few decades, the economy had been destroyed. But by that time the EIC had already moved on to the next opportunities for predatory trade: opium and tea.
The East India bubble was a turning point. Thanks to a rare moment of the Crown being more powerful than the company during the bust, the bailout and regulation that came in the aftermath of the bubble fundamentally altered the structure of the EIC and the power relations between it and the state. Over the next 70 years, political, military and economic power were gradually separated and modern checks and balances against corporate excess came into being.
The whole intricate story of the corporate takeover of Bengal is told in detail in Robins’ book. The Battle of Plassey is actually almost irrelevant; most of the action was in the intrigue that led up to it, and followed. Even if you have some familiarity with Indian and British history during that period, chances are you’ve never drilled down into the intricate details. It has all the elements of a great movie: there is deceit, forgery of contracts, licensing frauds, murder, double-crossing, arm-twisting and everything else you could hope for in a juicy business story.
As an enabling mechanism, Britain had to rule the seas, comprehensively shut out the Dutch, keep France, the Habsburgs, the Ottomans (and later Russia) occupied on land, and have enough firepower left over to protect the EIC’s operations when the EIC’s own guns did not suffice. It is not too much of a stretch to say that for at least a century and a half, England’s foreign policy was a dance in Europe in service of the EIC’s needs on the oceans. That story, with much of the action in Europe, but most of the important consequences in America and Asia, is told in Mahan’s book. (Though boats were likely invented before the wheel, surprisingly, the huge influence of sea power upon history was not generally recognized until Mahan wrote his classic. The book is deep and dense. It’s worth reading just for the story of how Rome defeated Carthage through invisible negative-space non-action on the seas by the Roman Navy. I won’t dive into the details here, except to note that Mahan’s book is the essential lens you need to understand the peculiar military conditions in the 17th and 18th centuries that made the birth of the corporation possible.)
To read both books is to experience a process of enlightenment. An illegible period of world history suddenly becomes legible. The broad sweep of world history between 1500-1800 makes no real sense (between approximately the decline of Islam and the rise of the British Empire) except through the story of the EIC and corporate mercantilism in general.
The short version is as follows.
Constantinople fell to the Ottomans in 1453 and the last Muslim ruler was thrown out of Spain in 1492, the year Columbus sailed the ocean blue. Vasco de Gama found a sea route to India in 1498. The three events together caused a defensive consolidation of Islam under the later Ottomans, and an economic undermining of the Islamic world (a process that would directly lead to the radicalization of Islam under the influence of religious leaders like Abd-al Wahhab (1703-1792)).
The 16th century makes a vague sort of sense as the “Age of Exploration,” but it really makes a lot more sense as the startup/first-mover/early-adopter phase of the corporate mercantilism. The period was dominated by the daring pioneer spirit of Spain and Portugal, which together served as the Silicon Valley of Mercantilism. But the maritime business operations of Spain and Portugal turned out to be the MySpace and Friendster of Mercantilism: pioneers who could not capitalize on their early lead.
Conventionally, it is understood that the British and the Dutch were the ones who truly took over. But in reality, it was two corporations that took over: the EIC and the VOC (the Dutch East India Company, Vereenigde Oost-Indische Compagnie, founded one year after the EIC) the Facebook and LinkedIn of Mercantile economics respectively. Both were fundamentally more independent of the nation states that had given birth to them than any business entities in history. The EIC more so than the VOC. Both eventually became complex multi-national beasts.
A lot of other stuff happened between 1600 – 1800. The names from world history are familiar ones: Elizabeth I, Louis XIV, Akbar, the Qing emperors (the dynasty is better known than individual emperors) and the American Founding Fathers. The events that come to mind are political ones: the founding of America, the English Civil War, the rise of the Ottomans and Mughals.
The important names in the history of the EIC are less well-known: Josiah Child, Robert Clive, Warren Hastings. The events, like Plassey, seem like sideshows on the margins of land-based empires.
The British Empire lives on in memories, museums and grand monuments in two countries. Company Raj is largely forgotten. The Leadenhall docks in London, the heart of the action, have disappeared today under new construction.
But arguably, the doings of the EIC and VOC on the water were more important than the pageantry on land. Today the invisible web of container shipping serves as the bloodstream of the world. Its foundations were laid by the EIC.
For nearly two centuries they ruled unchallenged, until finally the nations woke up to their corporate enemies on the water. With the reining in and gradual decline of the EIC between 1780 and 1857, the war between the next generation of corporations and nations moved to a new domain: the world of time.
The last phase of Mercantilism eventually came to an end by the 1850s, as events ranging from the first war of Independence in India (known in Britain as the Sepoy Mutiny), the first Opium War and Perry prying Japan open signaled the end of the Mercantilist corporation worldwide. The EIC wound up its operations in 1876. But the Mercantilist corporation died many decades before that as an idea. A new idea began to take its place in the early 19th century: the Schumpeterian corporation that controlled, not trade routes, but time. It added the second of the two essential Druckerian functions to the corporation: innovation.
II. Schumpeterian Growth and the Industrial Economy (1800 – 2000)
The colonization of time and the apparently endless frontier
To understand what changed in 1800, consider this extremely misleading table about GDP shares of different countries, between 1600-1870. There are many roughly similar versions floating around in globalization debates, and the numbers are usually used gleefully to shock people who have no sense of history. I call this the “most misleading table in the world.”
Chinese and Indian jingoists in particular, are prone to misreading this table as evidence that colonization “stole” wealth from Asia (the collapse of GDP share for China and India actually went much further, into the low single digits, in the 20th century). The claim of GDP theft is true if you use a zero-sum Mercantilist frame of reference (and it is true in a different sense of “steal” that this table does not show).
But the Mercantilist model was already sharply declining by 1800.
Something else was happening, and Fareed Zakaria, as far as I know, is the only major commentator to read this sort of table correctly, in The Post-American World. He notes that what matters is not absolute totals, but per-capita productivity.
We get a much clearer picture of the real standing of countries if we consider economic growth and GDP per capita. Western Europe GDP per capita was higher than that of both China and India by 1500; by 1600 it was 50% higher than China’s. From there, the gap kept growing. Between 1350 and 1950 — six hundred years — GDP per capita remained roughly constant in India and China (hovering around $600 for China and $550 for India). In the same period, Western European GDP per capita went from $662 to $4,594, a 594 percent increase.
Sure, corporations and nations may have been running on Mercantilist logic, but the undercurrent of Schumpeterian growth was taking off in Europe as early as 1500 in the less organized sectors like agriculture. It was only formally recognized and tamed in the early 1800s, but the technology genie had escaped.
The action shifted to two huge wildcards in world affairs of the 1800s: the newly-born nation of America and the awakening giant in the east, Russia. Per capita productivity is about efficient use of human time. But time, unlike space, is not a collective and objective dimension of human experience. It is a private and subjective one. Two people cannot own the same piece of land, but they can own the same piece of time. To own space, you control it by force of arms. To own time is to own attention. To own attention, it must first be freed up, one individual stream of consciousness at a time.
The Schumpeterian corporation was about colonizing individual minds. Ideas powered by essentially limitless fossil-fuel energy allowed it to actually pull it off.
By the mid 1800s, as the EIC and its peers declined, the battle seemingly shifted back to land, especially in the run-up to and aftermath of, the American Civil War. I haven’t made complete sense of the Russian half of the story, but that peaked later and ultimately proved less important than the American half, so it is probably reaosonably safe to treat the story of Schumpeterian growth as an essentially American story.
If the EIC was the archetype of the Mercantilist era, the Pennsylvania Railroad company was probably the best archetype for the Schumpeterian corporation. Modern corporate management as well Soviet forms of statist governance can be traced back to it. In many ways the railroads solved a vastly speeded up version of the problem solved by the EIC: complex coordination across a large area. Unlike the EIC though, the railroads were built around the telegraph, rather than postal mail, as the communication system. The difference was like the difference between the nervous systems of invertebrates and vertebrates.
If the ship sailing the Indian Ocean ferrying tea, textiles, opium and spices was the star of the mercantilist era, the steam engine and steamboat opening up America were the stars of the Schumpeterian era. Almost everybody misunderstood what was happening. Traveling up and down the Mississippi, the steamboat seemed to be opening up the American interior. Traveling across the breadth of America, the railroad seemed to be opening up the wealth of the West, and the great possibilities of the Pacific Ocean.
Those were side effects. The primary effect of steam was not that it helped colonize a new land, but that it started the colonization of time. First, social time was colonized. The anarchy of time zones across the vast expanse of America was first tamed by the railroads for the narrow purpose of maintaining train schedules, but ultimately, the tools that served to coordinate train schedules: the mechanical clock and time zones, served to colonize human minds. An exhibit I saw recently at the Union Pacific Railroad Museum in Omaha clearly illustrates this crucial fragment of history:
The steam engine was a fundamentally different beast than the sailing ship. For all its sophistication, the technology of sail was mostly a very-refined craft, not an engineering discipline based on science. You can trace a relatively continuous line of development, with relatively few new scientific or mathematical ideas, from early Roman galleys, Arab dhows and Chinese junks, all the way to the amazing Tea Clippers of the mid 19th century (Mokyr sketches out the story well, as does Mahan, in more detail).
Steam power though was a scientific and engineering invention. Sailing ships were the crowning achievements of the age of craft guilds. Steam engines created, and were created by engineers, marketers and business owners working together with (significantly disempowered) craftsmen in genuinely industrial modes of production. Scientific principles about gases, heat, thermodynamics and energy applied to practical ends, resulting in new artifacts. The disempowerment of craftsmen would continue through the Schumpeterian age, until Fredrick Taylor found ways to completely strip mine all craft out of the minds of craftsmen, and put it into machines and the minds of managers. It sounds awful when I put it that way, and it was, in human terms, but there is no denying that the process was mostly inevitable and that the result was vastly better products.
The Schumpeterian corporation did to business what the doctrine of Blitzkrieg would do to warfare in 1939: move humans at the speed of technology instead of moving technology at the speed of humans. Steam power used the coal trust fund (and later, oil) to fundamentally speed up human events and decouple them from the constraints of limited forms of energy such as the wind or human muscles. Blitzkrieg allowed armies to roar ahead at 30-40 miles per hour instead of marching at 5 miles per hour. Blitzeconomics allowed the global economy to roar ahead at 8% annual growth rates instead of the theoretical 0% average across the world for Mercantilist zero-sum economics. “Progress” had begun.
The equation was simple: energy and ideas turned into products and services could be used to buy time. Specifically, energy and ideas could be used to shrink autonomously-owned individual time and grow a space of corporate-owned time, to be divided between production and consumption. Two phrases were invented to name the phenomenon: productivity meant shrinking autonomously-owned time. Increased standard of living through time-saving devices became code for the fact that the “freed up” time through “labor saving” devices was actually the de facto property of corporations. It was a Faustian bargain.
Many people misunderstood the fundamental nature of Schumpeterian growth as being fueled by ideas rather than time. Ideas fueled by energy can free up time which can then partly be used to create more ideas to free up more time. It is a positive feedback cycle, but with a limit. The fundamental scarce resource is time. There is only one Earth worth of space to colonize. Only one fossil-fuel store of energy to dig out. Only 24 hours per person per day to turn into capitive attention.
Among the people who got it wrong was my favorite visionary, Vannevar Bush, who talked of science: the endless frontier. To believe that there is an arguably limitless supply of valuable ideas waiting to be discovered is one thing. To argue that they constitute a limitless reserve of value for Schumpeterian growth to deliver is to misunderstand how ideas work: they are only valuable if attention is efficiently directed to the right places to discover them and energy is used to turn them into businesses, and Arthur-Clarke magic.
It is fairly obvious that Schumpeterian growth has been fueled so far by reserves of fossil fuels. It is less obvious that it is also fueled by reserves of collectively-managed attention.
For two centuries, we burned coal and oil without a thought. Then suddenly, around 1980, Peak Oil seemed to loom menacingly closer.
For the same two centuries it seemed like time/attention reserves could be endlessly mined. New pockets of attention could always be discovered, colonized and turned into wealth.
Then the Internet happened, and we discovered the ability to mine time as fast as it could be discovered in hidden pockets of attention. And we discovered limits.
And suddenly a new peak started to loom: Peak Attention.
III. Coasean Growth and the Perspective Economy
Peak Attention and Alternative Attention Sources
I am not sure who first came up with the term Peak Attention, but the analogy to Peak Oil is surprisingly precise. It has its critics, but I think the model is basically correct.
Peak Oil refers to a graph of oil production with a maximum called Hubbert’s peak, that represents peak oil production. The theory behind it is that new oil reserves become harder to find over time, are smaller in size, and harder to mine. You have to look harder and work harder for every new gallon, new wells run dry faster than old ones, and the frequency of discovery goes down. You have to drill more.
There is certainly plenty of energy all around (the Sun and the wind, to name two sources), but oil represents a particularly high-value kind.
Attention behaves the same way. Take an average housewife, the target of much time mining early in the 20th century. It was clear where her attention was directed. Laundry, cooking, walking to the well for water, cleaning, were all obvious attention sinks. Washing machines, kitchen appliances, plumbing and vacuum cleaners helped free up a lot of that attention, which was then immediately directed (as corporate-captive attention) to magazines and television.
But as you find and capture most of the wild attention, new pockets of attention become harder to find. Worse, you now have to cannibalize your own previous uses of captive attention. Time for TV must be stolen from magazines and newspapers. Time for specialized entertainment must be stolen from time devoted to generalized entertainment.
Sure, there is an equivalent to the Sun in the picture. Just ask anyone who has tried mindfulness meditation, and you’ll understand why the limits to attention (and therefore the value of time) are far further out than we think.
The point isn’t that we are running out of attention. We are running out of the equivalent of oil: high-energy-concentration pockets of easily mined fuel.
The result is a spectacular kind of bubble-and-bust.
Each new pocket of attention is harder to find: maybe your product needs to steal attention from that one TV obscure show watched by just 3% of the population between 11:30 and 12:30 AM. The next displacement will fragment the attention even more. When found, each new pocket is less valuable. There is a lot more money to be made in replacing hand-washing time with washing-machine plus magazine time, than there is to be found in replacing one hour of TV with a different hour of TV.
What’s more, due to the increasingly frantic zero-sum competition over attention, each new “well” of attention runs out sooner. We know this idea as shorter product lifespans.
So one effect of Peak Attention is that every human mind has been mined to capacity using attention-oil drilling technologies. To get to Clay Shirky’s hypothetical notion of cognitive surplus, we need Alternative Attention sources.
To put it in terms of per-capita productivity gains, we hit a plateau.
We can now connect the dots to Zakaria’s reading of global GDP trends, and explain why the action is shifting back to Asia, after being dominated by Europe for 600 years.
Europe may have increased per capita productivity 594% in 600 years, while China and India stayed where they were, but Europe has been slowing down and Asia has been catching up. When Asia hits Peak Attention (America is already past it, I believe), absolute size, rather than big productivity differentials, will again define the game, and the center of gravity of economic activity will shift to Asia.
If you think that’s a long way off, you are probably thinking in terms of living standards rather than attention and energy. In those terms, sure, China and India have a long way to go before catching up with even Southeast Asia. But standard of living is the wrong variable. It is a derived variable, a function of available energy and attention supply. China and India will never catch up (though Western standards of living will decline), but Peak Attention will hit both countries nevertheless. Within the next 10 years or so.
What happens as the action shifts? Kaplan’s Monsoon frames the future in possibly the most effective way. Once again, it is the oceans, rather than land, that will become the theater for the next act of the human drama. While American lifestyle designers are fleeing to Bali, much bigger things are afoot in the region.
And when that shift happens, the Schumpeterian corporation, the oil rig of human attention, will start to decline at an accelerating rate. Lifestyle businesses and other oddball contraptions — the solar panels and wind farms of attention economics — will start to take over.
It will be the dawn of the age of Coasean growth.
Adam Smith’s fundamental ideas helped explain the mechanics of Mercantile economics and the colonization of space.
Joseph Schumpeter’s ideas helped extend Smith’s ideas to cover Industrial economics and the colonization of time.
Ronald Coase turned 100 in 2010. He is best known for his work on transaction costs, social costs and the nature of the firm. Where most classical economists have nothing much to say about the corporate form, for Coase, it has been the main focus of his life.
Without realizing it, the hundreds of entrepreneurs, startup-studios and incubators, 4-hour-work-weekers and lifestyle designers around the world, experimenting with novel business structures and the attention mining technologies of social media, are collectively triggering the age of Coasean growth.
Coasean growth is not measured in terms of national GDP growth. That’s a Smithian/Mercantilist measure of growth.
It is also not measured in terms of 8% returns on the global stock market. That is a Schumpeterian growth measure. For that model of growth to continue would be a case of civilizational cancer (“growth for the sake of growth is the ideology of the cancer cell” as Edward Abbey put it).
Coasean growth is fundamentally not measured in aggregate terms at all. It is measured in individual terms. An individual’s income and productivity may both actually decline, with net growth in a Coasean sense.
How do we measure Coasean growth? I have no idea. I am open to suggestions. All I know is that the metric will need to be hyper-personalized and relative to individuals rather than countries, corporations or the global economy. There will be a meaningful notion of Venkat’s rate of Coasean growth, but no equivalent for larger entities.
The fundamental scarce resource that Coasean growth discovers and colonizes is neither space, nor time. It is perspective.
The bad news: it too is a scarce resource that can be mined to a Peak Perspective situation.
The good news: you will likely need to colonize your own unclaimed perspective territory. No collectivist business machinery will really be able to mine it out of you.
Those are stories for another day. Stay tuned.
Note #1: This post weighs in at over 7000 words and is a new record for me.
Note #2: I hope those of you who have read Tempo got about 34.2% more value out of this post.
Note #3: Yeah, I am opening up a new blogging battlefront, after nearly two years of pussyfooting around geopolitics and globalization via things like container shipping and garbage. Frankly, I’ve been meaning to for a while, but simply wasn’t ready.
About Venkatesh Rao
Coasean growth will be measured in how well each individual is maximizing their own utility function. The next 100 years will include much balkanization of sub-cultures. People will realize there’s no need to waste time in conflict with people you disagree with. You can discover and coordinate with like minded individuals to form flash corporations for however long an idea is viable.
Now get a bitcoin wallet so people can tip you easily :)
+1
This already exists in a sense. Think about Kickstarter, a website that allows individuals to contribute to interest-specific projects in exchange for the resulting product. In essence, these flash companies or micro companies are allowing consumers to support only what they want produced without subsidizing a company’s ancillary activities.
Dear (Sirs),
Your comment that “Corporations have reached their golden age” reminds me of the idiot studying the reflex actions of frogs; upon cutting off a limb, the frog was coaxed to jump-to the idiot’s shock and surprise, he concluded that “Frogs (upon losing all 4 limbs), suddenly turn deaf.”
When governments stop harassing and taxing and extorting corporations, corporations shall roar back into prominence. Until that day, there is no alternative structure more capable of withstanding this assault.
Your article successfully evades this small point.
Respectfully submitted,
Corps. are dead people. What happened to natural persons? or were they the spinnoffs of corporate personhood? It’s either me or your corps. WE cant both live on this earth.
business has only become relevant as a means of productive exchange with incentive for gain.
Although I do agree that perspective is the greatest frontier in terms of humanity’s evolution, we lack or have forgotten much of the fundamental axioms from which all of life is readily based. We must strive and venture back to our roots in aligning all perspectives of gain, business, and purpose to serve the greater good of all.
The future of humanity requires a shift in fundamental principles that acknowledge a unilateral field of interconnectedness. The impetus that will herald a collective shift in consciousness reigns by our intuitive understanding of who we are.
Deeper contemplation of Self reveals an indistinguishable source which permeates throughout all of matter and existence. . .
Consider for one moment that gasoline, oil or combustible fuel is a volatile but crude fire technology, which is a compromising and very limiting form of energy transference. Upon careful speculation one will realize that Hydrogen is the catalyst in all combustible fuels. Crude Oil as we know it, has a higher concentration of carbon and for this reason when speaking in terms of exhaust is referred to as hydrocarbons, or unburnt fuel. Notice that water is an abundance of Hydrogen without any sort of waste material… In fact, all combustible engines can run on water over fuel, with some slight modifications in the manufacturing process and blueprint.
Go even further along this line of thinking and it becomes apparent that all of biological life contains a liquid, which in most cases is water, a very conducive vessel to house the proper parameters of causal interplay known as life. All plants produce energy through a process identified as photosynthesis, the process in which, requires water as well…
..Its not about business, in as much as it is about perspective and mirroring the cyclical approach explicit in nature. Words are an interpretation of what have you.
Firstly, for corporations and any sort of economic order to progress, we must rectify and absolve all our fundamental misconceptions of value and symbiotic exchange, namely recreating the standard which we have long forgotten and as a result given power over to select few to monitor, control and manipulate.
Secondly, we must realize that free energy is not a theory, but the law of Life. The principle that all impetus is transduction permeating form/formless.
I’ve noticed a curious duality that’s arisen as of late surrounding attention. Anyone who attended South by SouthWest this year couldn’t help but notice the increasingly desperate & expensive marketing tactics which were deployed to claw even an iota of attention at the increasingly packed conference (my favorite was a startup handing out free breakfast burritos on the street *without bothering to mention the name of the startup*. I stood there bemused for a solid 3 minutes, watching them handout food before a single, sympathetic passer by finally asked who they were actually with).
SXSW is the leading edge of this trend because it’s, in theory, a crowd full of “influencers” but the signs are now everywhere if you pay attention. I spend my days in bafflement at the sheer degree of effort marketers now put them through to capture my attention. At the same time, I notice my own attention channels becoming increasingly more difficult to reach as each one gets spam proofed, filtered, personalized & desensitized.
On the flip side, is the mind bogglingly vast pools of aggregated attention that have been accumulated via the “bored at work” crowd. Zynga, Reddit, College Humor, Facebook, ReCaptcha, Wikipedia, TV Tropes and others are able to tap into a seemingly infinite supply of boredom and fill it with low-medium grade entertainment which is constructed for this express purpose. Despite this, people still complain that there is not enough on the internet to fill their days and huge and growing wells of attention sit, unexploited.
It’s this curious duality which has me fascinated.
> and others are able to tap into a seemingly infinite supply of boredom and fill it with low-medium grade entertainment which is constructed for this express purpose. Despite this, people still complain that there is not enough on the internet to fill their days and huge and growing wells of attention sit, unexploited. It’s this curious duality which has me fascinated.
My belief is that the duality makes perfect sense if you understand it as the complaint of a video gamer that he’s bored, but who isn’t really happy while playing a video game either. (Ever watch a FPS player? They’re unhappy, but they’re not really enjoying it when they’re playing either. They don’t smile, they just focus and ‘are’.) There’s plenty of low-grade content, which they still have the mental wherewithal to follow, but which is too simple to really engage them; but when they come across something challenging like a long math tutorial or an extended essay, they no longer can deal with it and so either skim or move on to the next low-grade content.
Take this essay. It ought to absorb plenty of your attention. Peak Attention is a logical corollary to Shirky’s claims about Wikipedia and TV watching, with consequences for a lot of Internet practices – something you could think and write about for a while. The linked books are good (I’ve only read Mahan so far), and absorb many hours in their own right. The economics is worth investigating (is the decline of the corporation really true? I would guess worldwide that China’s corporate growth alone is enough to counterbalance the claimed statistics. And how does the Great Stagnation come in?), again many hours.
But all of this is intellectual work. Like exercising, it’s enjoyable if you are already good at it. But if you are not, you are stuck between low-quality fare you know to be low-quality, and between high-quality entertainment you are too lazy/intellectually weak to handle. No wonder surfing Reddit can be so unsatisfactory!
Yes indeed the question is:
What approach can empower a personally relevant, viscerally effective,
universally reusable, cross disciplinary, powerfully collaborative, set of organic-relationship framing-tools for the rest of us.
Organic-relationship framing-tools that are simple enough to penetrate the mind’s eye of mass culture as bedrock memes for visualizing and implementing organically self-adjusting relationship-networkers.
Organic-relationship framing-tools that focus our collective mind’s eye on universally reusable organic-network synchronization-dynamics.
The same organic-network synchronization-dynamics that nature so effectively demonstrates when maintaining homeostasis(cyclical dynamic equilibrium) among complex arrays of mutually interdependent, mutually adaptive, biological subsystems(networked participants) all in the context of continual internal and external environmental stresses.
We need a new globally accessible, shared metaphor and lexicon that properly captures our new organically-interdependent networked social reality.
Everything that is important when discussing our new social reality and the dynamics of social commerce in a network based economy are now best framed as instantiations of organically interdependent social-systems.
Applying an organic-process framing-metaphor to all human activate catalyze the development and adoption of mutually adaptive social-network structures that can over time effectively morph mutually adaptive into mutually beneficial, best fit, utilitarian homeostasis.
A universal organic-social-metaphor and lexicon
can serve as an
organic-relationship framing-tools
WHY – ORGANIC PROCESS LITERACY
organicprocessliteracy(dot)tumblr(dot)com
That post made no sense to me. Can you please explain to me what it means in plain english?
We need a new metaphor and lexicon to helps us effectively visualize and speak about the basic recurring processes that will dominate our lives in an organic-complex network-based economy.
Sorry about the thicket of adjective / noun phrases.
An obviously failed experiment at jamming way to many abstract nuances in too few words.
Your feedback helps clarify that failure!
> and others are able to tap into a seemingly infinite supply of boredom and fill it with low-medium grade entertainment which is constructed for this express purpose. Despite this, people still complain that there is not enough on the internet to fill their days and huge and growing wells of attention sit, unexploited. It’s this curious duality which has me fascinated.
My belief is that the duality makes perfect sense if you understand it as the complaint of a video gamer that he’s bored, but who isn’t really happy while playing a video game either. (Ever watch a FPS player? They’re unhappy, but they’re not really enjoying it when they’re playing either. They don’t smile, they just focus and ‘are’.) There’s plenty of low-grade content, which they still have the mental wherewithal to follow, but which is too simple to really engage them; but when they come across something challenging like a long math tutorial or an extended essay, they no longer can deal with it and so either skim or move on to the next low-grade content.
Take this essay. It ought to absorb plenty of your attention. Peak Attention is a logical corollary to Shirky’s claims about Wikipedia and TV watching, with consequences for a lot of Internet practices – something you could think and write about for a while. The linked books are good (I’ve only read Mahan so far), and absorb many hours in their own right. The economics is worth investigating (is the decline of the corporation really true? I would guess worldwide that China’s corporate growth alone is enough to counterbalance the claimed statistics. And how does the Great Stagnation come in?), again many hours.
But all of this is intellectual work. Like exercising, it’s enjoyable if you are already good at it. But if you are not, you are stuck between low-quality fare you know to be low-quality, and between high-quality entertainment you are too lazy/intellectually weak to handle. No wonder surfing Reddit can be so unsatisfactory!
I don’t know how to resolve the dichotomy either, but the notion of attention entropy might be relevant. Time is handed to us by nature in recurrent patterns (daily, weekly etc.) each with a certain scope for attention. Post-lunch hour will always be fundamentally less valuable than a well-rested early morning.
Each kind of natural empty time is recycled through different attention uses by different production or consumption activities. Entropy increases through this process.
So not all attention is actually usable, and all attention gets less usable over time under Schumpeterian mining. When a pool of attention has been downcycled through various products to the point that it is in the attention-entropy max point (being used for couch-potatoing, consuming lowest-common-denominator programming), it can’t directly be reused for other stuff. You have to lower entropy for the whole lifestyle first.
So the large available attention pools may be deadpools of max-entropy attention that are no longer usable for production or higher-margin consumption.
Just a theory at this point.
I don’t think it’s that. After all, the traditional attention commodity of television advertising mined the attention of exactly the most passive attention that is captured by these vast pools today. I’m going to argue that we have perhaps commensurate amounts of spare attention today, what’s become scarce are attention *channels*. It’s become increasingly harder and harder for outsiders to reach in and tap into this attention than before, despite the bulk quantity being the same. As a result, from the consumer side, attempts to use up their excess attention become less efficient since the SNR of all of their channels is decreasing. This is what I think explains this dichotomy of both increasing desperation on the marketer side and increasing boredom on the consumer side.
This ties in with another broad trend that I’ve been noticing of which department “drives” Silicon Valley startups over time. In the aftermath of the 1999 bubble, it became accepted, standard, best practice that engineering drove the company because technological innovation was what pioneered new markets. Facebook, IMHO, marked the phase shift where companies moved from engineering driven to product driven (and Twitter was the final stake in the heart) because now product insight was what pioneered new markets. The Lean Startup movement arose as a lagging trend in this and exemplifies the mindset in which customer development is the key activity and you construct the rest of your startup around that (including relegating “build the product” back into a commodified, black box).
What I predict will be the next phase shift is moving from a product driven company to a channel driven company. Companies will innovate on discovering new attention channels and then constructing an entire startup solely around best exploiting that channel. Right now, smart entrepreneurs are saying “I’m creating this great tool for small businesses doing X, how can I sell it to them?”, whereas what they should be saying is “I’ve figured out a way to reach small businesses doing X, how can I create a tool to exploit this channel?”
I agree with much of what was said by everyone above. The way I think about it is that context switching is difficult, particularly when we don’t know what to expect from the context we are switching to. This is a corollary to the maker-time/manager-time concept. If someone is bored at work he knows he only has a certain amount of time before the next interruption. Low-grade mindless material is certain to fit within that small window of time and the context switch is relatively easy.
When dealing with new material not only is the context switch potentially more difficult but the difficulty of the context switch is also unknown. I have sources in my RSS reader that sit there unread for months because I have forgotten what they are and why I added them and I don’t know when to fit them in to my routine.
Merging comments from everyone above, when entropy is high we return to channels that are familiar because we understand intuitively how to fit them in, consume them with a minimum of effort. To gwern’s point, that doesn’t necessarily mean we are happy to be consuming low-grade content. It just means it fits in easily. The primary benefit I note of Xianhang’s channel driven company is that it intuitively conveys context…presumably these channels would group content with similar attention demands so that the content consumer can simply pick the appropriate and be fed content that fits in the chosen context.
The terminology “channel” is actually quite appropriate by analogy to TV channels. You don’t turn on HBO if you have 15 minutes to kill. Instead you flip to espn or cnn or some similar material that can be consumed in small chunks.
The concept of time reminds me of Teihard de Charden’s concept of Human Energy. Two major issues are “How to Develop Human Energy” and ” How to direct Human Energy.” Direction of Human Energy is dictated by one’s perspective. Perspectives can be conceptualized and measured by approval or rejection of major ideologies and isms. My Ideology Inventory has been a fruitful exploration of different perspectives that merits further development. Piget found infants are unaware of different perspecties.Perhaps mankind has also had limited awareness of differnet perspectives.
What you said reminded me of a post that I recently read that deals with viral loops, where the author says…
Instead of:
“We have product X, how do we virally spread it?”
… we ask:
“We have viral loop X, what’s the right product to put into it?”
http://andrewchenblog.com/2007/09/01/viral-marketing-is-not-a-marketing-strategy/
In that sense, it sounds like you’re talking about attention “exergy”. We need concentrations of low-entropy attention in order to be more productive. But in order to complete this analogy for a potential a-ha moment, we need to address the idea of entropy moving from one area to another.
The strategy I strive for, though I don’t have some fancy theory for it, is that when I hit that “max entropy attention” point, I try to run like hell from the internet, TV, etc. and commit to doing absolutely nothing (taking a walk, lying on a patch of grass, watching paint dry, etc.)
I think there’s also a narrative element. Sometimes when I have trouble focusing, it’s because some other thread of enactment is pulling me away from what I’m trying to do. For this reason, and also trying to solve the “physical willpower vs. habit” conundrum, I’ve been wondering if willpower and attention could be framed according to Boyd’s E-M theory (raw willpower as engine-power, habit/automation as kinetic energy).
One quite notorious overlook here is the creation of the modern limited liability (LTD) corporation. This occurred in the middle of the 19th century. Some sources say 1862, others place it as an evolution that occurred from the 1840s through the 1860s. This precisely the era in which the EIC fades out of existence, by-the-way.
Limited liability was an enormous change. The VOC and EIC were corporations, yes, but, they did not have limited liability. The LTD corps were smaller, perhaps, but more resilient and replicated into all sectors of the economy, not just trade and agriculture.
The EIC may have been enormously powerful at its zenith, but it was one of only a few corporations though out most of its existence. Most people were sole proprietors or in partnerships. There are reasons for this: one does not want to be liable for what one does not control. It took state action to make the corporation viable. In the mercantile age, this was in the form of monopolies – and even then they did not always survive (I distinctly recall there being a “West India Companies” from England and/or Holland in my high school history text books – that never amounted to much, perhaps they were the founders of New York City – I can’t remember). In the ‘Schumpeter’ age, this was the government concession of limited liability. This concession changed the nature of proclivity of ‘the corporation’.
In 1860, the United States had the broadest distribution of wealth, in one of the most dynamic economies in history, despite the fact that 10% of us were still held in the bondage of slavery. In 1861 we went to war to fix that, and yet 25 years after a successful outcome, wealth was more concentrated than ever. The biggest reason was the limited liability corporation – it had become pervasive.
The term”Schumpeter corporation” used here, looks like its the limited liability corporation. Intent of the LTD corp was to facilitate capital formation, specificially called for in the creation of railroads. They facilitated technological capital formation paving the way for the ‘second industrial revolution’ where firms used the systematic application of science to create new technologies. Only with the LTD corp do you have the giant industrial trusts.
So I think the essay here is on the right track but hasn’t got it totally correct yet. The VOC and EIC were creatures of the Mercantile age, but they were formed with Government protections of a different sort. The LTD corp was definitely a post industrial age creature. And the reason they are so comfortable with technology is that they were created to concentrate capital to make use of technology and push it along. That’s the obvious part of the LTD part of the LTD corporation.
I would submit that the East Asians are on to another kind of corporation altogether. Yes, they are LTD corporation, yes they ovstensively have the same rules, but in practice they behave quite differently. They have tenured employees, and that causes them to behave much more differently than Anglo-American style LTD Corps. One result, I’ll just say one here, is that the focus of the American style is very short term and prone to mergers, where as the East Asian is focused on long term market share and resilient towards mergers (there are 3 auto companies in the US for a market with 300 million people, in Japan they have 8 car companies for a market of only 127 million people). For decades now, American Executives, Business School Academics and Business Journalist Pundits have been telling us that Japan would ultimately have to adopt the American style, but that doesn’t seem likely (no Japanese auto companies declared bankruptcy in post 2008 crisis, while 2/3rds of America’s companies did, and the third only narrowly avoided doing so).
Under both Japanese and American law, LTD corps are supposed to be run with shareholder primacy rules (the interests of the shareholders comes first). In both cases, this is not what happens.
In the U.S. the interest of the Executives comes first, as evidenced by executive pay. The average American CEO has only a 4 year or less tenure. If you make it to CEO, it is probably your last gig. Therefore you are highly motivated to pad your estate in preparation for retirement. As a result American Corporations are notoriously and highly short term oriented.
In Japan, because of tenure, the interest of workers comes first: what do workers want? They want to keep their jobs 20 years hence, and protect their retirements beyond that. As a result Japanese corporations are focused on long term market share growth. As it turns out, stock markets value market share. As a result, Japanese workers turn out to be a better proxy for long term shareholders than American Board of Directors and Executives do.
There’s something else going on here – an it appears to be a bit of retreat from Frederich Taylor style modernism. The mind of the American worker (or his ‘attention’) is not employed in his work, quite the opposite in the Japanese system. Likewise, the Corporation appears to be a communitarian construct for a variety of stakeholders – not just fungible shareholders. If this model has a competitive edge, and it appears that it does, at some point it will manifest itself in being adopted in the west.
The corporation was and is a product of modernism. The essence of Modernism has always appeared to me, to be boiled down to this notion: “the separation of tasks.” The date for the start of the modern age is usually pegged at 1500 ad, the place, Europe. The reason for this, is all the things this essay has pointed out as happening around 1500: the renaissance (itself the result of economic growth in agricultural productivity in Europe which fostered the demand for Asian products), the age of exploration, the reformation, and the Enlightenment (which gave us reason, secularism, reason, impirism (modern science). The corporation was an extension of the separation of tasks: the state provides the security, the corporation seeks out mercantile/trading success.
(Separation of tasks occurred in Europe because it was already pre-disposed to it philosophically and politically speaking. This is directly opposite to the Islamic emphasis of cohesion – the source of Islam’s early competitive edge: one god, one prophet, one community, one class, one law. Europe embraced a religious philosophy that saw three gods in one, and one of those entities embracing a separation of church and state, and political fragmentation in Europe since the fall of the Roman Empire meant separation of secular power from non-secular power. The reformation perhaps was THE inflection point that turbocharged this trend, eliminating the monopoly on thought held by religion paving the way for science, reason and logic. In this environment, a state wanting to advance its wealth to protect its security, might see the advantages of granting monopolies to corporations to pursue trade, while it concentrated on security.)
The modern age can be neatly identified as having to distinct chapters: mercantilism and industrialism, with the later springing out of the former. Mercantile trade expands the value of land, but industrialism expanded the value of land even further still to the extent of making extensiveness of area less important than intensiveness of the area. Britain’s industrial productivity, with less than 100,000 sq miles, was greater than the rest of Europe’s combined in 1815. (This gave Britain 50 years of global hegemony allowing it to claim and turn distant Australia, Canada and New Zealand into English speaking countries (the former two of continental proportions, the latter of European nation-state proportions)). But there’s a continuum in Modernism economics: From Adam Smith to David Ricardo to Frederic Taylor. The ultimate expression of the latter is found in Charlie Chapman’s “Modern Times.”
The modern age, with its academic capacities, is unique in many ways from all ages prior to it. One of those ways is that academics began pondering what comes next, after Moderism? (No one wondered what came after Agriculturalism.) There was much speculation. One reasonable aspect of this speculation was that it would not be western centric. But most descriptions of “post-modernism” seem to look more like an extreme form of modernism, perhaps modernism taken too far. And here we seem to come full circle. The Japanese models that are spreading throughout East Asian periphery are a combination of Western Modernism and Eastern Confucian notions of communitarianism. This becomes most evidenced in “The Machine That Changed the World” a book written by MIT and Harvard economist on post World War II Japanese industrialism, centered on the auto industry.
I am tiring here, so let me say, that Ronald Coarse ideas seem to explain the genius of these new institutional arrangements. The Japanese/East Asian formula merges elements of modernism with communitarianism and as a result you have paradigms of extensiveness (aka economies of scale) with the paradigm of intensiveness, the latter being on a more human scale. This trend promises to release Charlie Chapman from what was enslaving and beleaguering him in “Modern Times”.
I’m not sure what this says for India. They are definitely not Confucianistic. Moreover, India has more intensively imported European modernistic institutional and organizational arrangements. There again, India’s religion, and philosophical bearing is, like Europeans, philosophically more centrifugal. All of this suggest to me that Neo-confucianistic (with its inherent communitarianism) fusion with modernism is what comes after Modernism, economically speaking, and the location is going to be East Asian Centric. Perhaps India will once again adapt, and perhaps more quickly (it is quite good at this, though not nearly so as Japan was) otherwise, India might have to await for a different age.
Meanwhile, what happens in Europe remains a bit of a mystery. If I were to guess about what happens in America, I would say, we will probably become something of a new age banana republic – even as the old banana republics begin to rise. America is the ultimate expression of Modernism. Our age, is most likely, over. Indeed, as this is being written, American corporations are basically taking control of the government – the milestone being Citizens United and Arizona Free Enterprise Club.
I don’t think corporations are dying in America, except to say that they have taken over America, and eventually they will kill the patient (my reasons for this have to do with conditions that can only be explained in another semi-essay) and in killing America they might kill themselves. As suggested above, the Neo-Confucian-communitarian-corporation has already proven to be much more resilient than the Anglo-American version.
Very interesting, thanks.
I didn’t get into the legal side of the story (the gradual evolution of laws surrounding corporations) because it would have made the post even longer and because I think the laws follow and codify practice in this story, rather than lead, for the most part. But yes, an important thread. The post-corporate future in a sense will be a creation of any new laws that evolve to govern Internet-enabled businesses.
Well, the various posts have given me much to think about and so my ideas are evolving.
But a few salient or outstanding points seem to me:
1) Prior to the limited liability corporation, few corporations existed. The EIC and VOC were one of only a hand ful of corporations. And they were an attribute of the Mercantilist era of the more broader and still in effect Modernist Era.
Chapter 2 of the Modernist era would be the Post-Mercantilist era, the Schumpeteran era that you talk about, or the “Capitalist” era, or “the second industrial revolution”. Still modernism, but the EIC and the VOC are no longer appropriate. The corporation evolved into another body: the modern limited liability corporation. This is an altogether different animal.
Chapter 3 is coming at us. It is the era of the “Singularity” corporation. That is the style crafted in East Asia. The corporation is an ownership collective – a singular collective. It gets attached to a singular union (a company union). That Union is empowered by tenure and board representation. It seems to be coming clear that “singular” corporations have a competitive advantage over traditional Anglo-American limited liability corporations. The Japanese singular corporation impelled America’s migration into a precocious post-industrialism by chasing American manufacturing out of light and electronics fields prematurely.
The singularity corporation will be resisted by the Executive class: it is an alignment of employee and shareholder interest at the Executive’s expense: but it protects long term interest of shareholders, workers, and more competitive and productive firms with long term outlook. It is also more moral and more human. Modernism, as Charlie Chaplin so vividly demonstrates, was, in many ways, de-humanizing to the individual, by denying them the traction that comes with community, properly defined.
The human need for community, especially to cure human evil, is vividly defined by Dr. M. Scott Peck’s famous books “People of the Lie: the hope for curing Human Evil”; “The Road Less Traveled” and “The Different Drum” – if you put those books together you get an idea of the causes of dystopia in the modern era and a way to solve them – by reintroducing more opportunities for community for human existence. All of this is made more poiniant by the recent shootings in Aurora, Colorado.
We need new and better institutional/organizational arrangements. Human’s in the modern world need attachment and community as much and in balance with independence and individualism and individual liberty. We need a new and better economic organization.
Thus, I don’t think the corporation is going to go away. Instead, it will evolve. This is what it did as it passed from the mercantile era into the ‘schumpeteran’ era. Now we are going to move into a new era, and with that will come a new kind of corporation, and hopefully this corporation will be more kinder and more human centric. These corporations already exist – in Japan and East Asia, just not in the United States.
While living in Korea, I saw an interview on CNBC with an America economic elite who headed J.P. Morgan’s Japanese office, and he talked briefly of his desire to eliminate lifetime employment (tenure) and employee primacy in Japan (to create Executive primacy there, as it is here). They haven’t succeeded in doing that. More likely, they opposite will occur – because it is a better model. Executive primacy will give way to the Singularity Corporation and employee primacy. (Please note that employee primacy is a better proxy for long term investors because they both want the same thing, long term market share growth).
Fascinating, thanks. I am exploring some of this in much greater depth in my next book project. You may be interested in that.
tl;dr
(Just kidding)
“Just ask anyone who has tried mindfulness meditation, and you’ll understand why the limits to attention (and therefore the value of” time) are far further out than we think.”
I’m intrigued – what exactly do you mean here?
Isaac: Gronk is right. It’s not something to be explained really. And it doesn’t have to be mindfulness (that’s just the most common disciplined approach). Plenty of experiences can help you realize that most of us have just scratched the surface when it comes to manipulating our attention.
I am not personally very good at it, but I’ve met people who basically pull off superhero attention stunts. In physical stuff there isn’t that much difference between an average person and an Olympic athlete. In mental feats, I’d say there is a 10-100x difference between people who have mastered their attention and those who haven’t.
” In physical stuff there isn’t that much difference between an average person and an Olympic athlete. ”
You´re completely wrong here.
The physical strenght of an athletic person is much bigger than that of the average coach potato.
Your analogy only makes sense if you effectively compares an olympic athlete to a master of attention.
“most of us have just scratched the surface when it comes to manipulating our attention”
Very true! But still I think it is useful to differentiate between
MANIPULATING someone else’s attention
and
MANAGING our own attention
Manipulating is more in line with what Public Perception Management firm do to shape the public mind using media ecology techniques.
I know this is just word semantics but it somehow tweaks my sensibilities ;-)
You’re talking about raw physical force, but what of martial artists? A world-champion in push-hands Tai-Chi may not be able to lift as heavy a weight as an Olympian power-lifter, but their ability to concentrate force in a specific area with minimal travel-time and friction seems to be a 100x effect (unless Josh Waitzkin is exaggerating/lying).
Isaac, giving mindfulness meditation a go for a month is practically the only way to understand what he means by that. It’s quite a novel, rewarding experience and you need nothing but some time and willpower. Paradoxically, you may notice as you practice that with the increased focus and attention you actually gain more time than you put in. I think that’s what is meant by that.
Thanks, I’ll certainly give it a try. Do you have any recommendations for beginning resources?
This is a great article by the way, I’m still trying to get a proper conceptual grasp on the idea of colonising time… I think this is definetly an article that will reward future reading.
Have a look at Mindfulness in Plain English by Bhante Henepola Gunaratana, it seems like a good place to start. It focuses on exercises and practical advice, only lightly touching on the religious/mystical underpinnings of Vipassana meditation.
(Incidentally, I’ve been reading this in parallel with studying Stoic philosphy, and I’m struck by the similarity of the two. Both, for instance, focus on maintaining emotional equilibrium through both highs and lows, good fortune and bad.)
I can recommend Mindfulness: A Practical Guide to Finding Peace in a Frantic World (http://www.amazon.co.uk/Mindfulness-Practical-Finding-Frantic-Meditations/dp/074995308X/) as great book for beginners.
This is based on application of mindfulness techniques used ( and scientifically proven) as therapy for people suffering from depression and is free from any religious dogma.
Agreed… This book is amazing and lives on my bedside table!
Coasean growth is already happening where people are reaching peak time by getting involved in creating zero marginal cost goods, not to just to gain economic value but to gain social capital and get better at their trade; where they can achieve craftsman like skill sets faster than allowed by Schumpeterian corporation. Essentially the big corporate pyramid is getting inverted into lots of small, self sustaining activities that are driven more by the individuals interest and passion than an external requirement.
Awesome Post.
I have one point though… You are peak oil aware.
How much do you think the growing lack of resources will dial us back to the world of malthus?
The way back will obviously be different from the way forward (like magnetic hysterisis diagrams) but aren’t you concerned at all that humanity will run out of easily used resources and will have to restructure radically, getting used to a much lower throughput of the same?
I can foresee hong kong as a way to maintain a high information economy with low energy inputs, but can most of humanity even achieve hong kong’s levels? (Makes me feel extra sad for India my country, that we are not scooping up the resources and building up infrastructure, the way china is doing right now, in this last gasp for fossil fuels)
This is the force driving mega-urbanization around the world. Megacities organized around neo-urban lines are extraordinarily efficient in information vs. energy terms.
Unfortunately, they are also insanely complex to build, and nearly impossible to humanize.
Paradoxically, the leftist reaction to this thought is to think of small/local utopias. That is definitely unscalable to 9 billion (which we’ll hit within a couple of decades). I wish it weren’t.
Try Kaplan’s “Monsoon.” India isn’t quite as far behind China in the race for the last remaining natural resources as you might think (especially in Africa), but yeah, significantly behind.
China is way ahead in terms of raw numbers, but India has a few key strategic trump cards, the main one being its dominant ocean-facing location that China has to work around. China’s own 2-ocean position turns out to be quite a liability in some ways.
But overall, advantage China for now, as far as dominating the Indian Ocean rim goes.
I dunno about that. Planned cities are hard to humanize. Grown ones are already humanized. Christopher Alexander had the same insight James Scott did (re the rational forests), starting as early as five decades ago.
I stumbled on this article and I have to say I’m glad I did. Outstanding post, and also excellent and well thought out comments all-around. My brain got some much needed exercise after reading it.
As for the leftist idea of local utopias, in my opinion I think they were never meant to be scalable in the first place. They’re not meant for everybody, only those who came up with the idea. The rest of us will have to deal with the mega city and they won’t be humanized in any way.
In the India and China race, I believe China is the hare and India is the tortoise in this one. China can sustain its growth by rigging the system for only so long. America isn’t even a hare in this race at it got so far ahead initially it thought it won, declared victory, and went home to watch TV and eat potato chips. At the last minute I’d say America will realize what is going on and get back in, although I have no idea how that will turn out.
Let’s say new fossil fuel deposits which will come on line can be exploited for longer than anticipated (Oil off of Brazil, natural gas in the USA as two examples. It is possible. If you remember 15 years ago or so everyone thought natural gas was running low in the America, now with new technology huge reserves are opening up), unfortunately the same problem remains, it is just pushed further into the future. The easy to obtain energy will be gone, and difficult energy will be all that is left, with all that entails. Society as a whole will absolutely restructure (after some pain and maybe a few temper tantrums expressed as wars) simply because we will have no other choice. As with so many other situations in history, we will find a way.
Don’t social transaction costs dictate scaling down to below 6 billion?
Not all scaling problem can be defined as positive growth?
A fabulous article! More than merely an overview of the history of the corporation… but an essential perspective for understanding current trends and where they are going.
Thank you! I’m now a follower…
I hope you’ll give some thought to an innovation I believe will be part of the next iteration:
Leveling The Transaction Landscape: Technology and the Campfire
http://culturalengineer.blogspot.com/2011/04/leveling-transaction-landscape.html
It’s just possible that facilitating and unburdening the peer-to-peer micro-transaction (especially in certain areas) and its networking is an essential element for what you’ve so aptly described as Cosean growth? Particularly under some form of ‘user-owned’ utility.
minor correction
I think you mean Hubbert’s Peak not Humbolt’s Peak.
Otherwise, awesome post. Thankyou.
thanks, fixed!
Super interesting post,
I think you’re spot on in saying tomorrows world will no longer be governed attention but by perspective.
I think (and other may disagree on this point) that memes are the core, currently we have or are reaching a state were memes are filling all our available attention.
In that context perception (and as you put it mindful meditation can help in achieving this goal) is nothing else than the ability in us to control our attention instead of letting it be controlled by memes. And I think services will arise (or already exist in a primitive form as in social networks) to help in managing our perception, training our minds and exposing it to new memes (and then lets us think critically if we want to replace existing memes by the newer memes).
Just two cents.
The manufacture of memes is like the manufacture of consent.
A necessary evil.
In both cases the real question is who is in charge of the manufacturing process!
Meta-Memes for me and Meta-Memes for you ?
Meme us all up Scotty.
nice post …. and as to corporations, may they all die.
Thank you — great post and thought-provoking in my shallow consumption of it. In your discussion of the 1600s and the Dutch VOC, Neal Stephenson’s “Baroque Cycle” came to mind. Have you read this? I was a big fan from Snow Crash and Cryptonomicon going into it, but got bogged down in the first book and was disappointed to ground to a halt about halfway through. But I picked it up more than a year later and finished the series and loved it. Fantastic fictional depiction of the time and I’d be curious to know your opinion of it or if you found it valuable in thinking about these things. Thanks again for all your great posts here. I’m happy to divert some part of my short attention span your way.
A very deep and interesting post. The description of EIC’s trade equations reminded me of Milo Minderbender’s M&M Enterprises from Catch-22.
Truly breathtaking post. Say “AArrGHHH.” That’s what the east India company was all about. And their activities were illegible for the most. Most people don’t even realize here in America we fly an only slightly modified version their flag.
They created nation states to facilitate trade. The salient structure was not national borders but networks. Buckminster Fuller figured them out. The pirates were the only ones who could connect the dots and see the big picture. Everyone else limited their attention to their little sphere of interested, which worked out well for the pirates, because if everyone knew what they were doing it would be a lot easier to jack their gold.
Time and space is just a way of organizing attention. Roaming the seas, roaming big grasslands, lends a broader perspective. You end up seeing lots of weird customs between more sedentary populations that don’t know each other. Values become more relative. Using lateral thinking, you make connections that are invisible to others with more limited perspectives. That’s the Pirates advantage. The pirates knew the world was round long before everyone else.
The global perspective is not really invisible any longer to anyone with an internet connection. But most people still don’t think like pirates or roving barbarians. But it lends a potentially broader perspective to anyone and appears to transcend time and space.
“Coasean growth discovers and colonizes . . . . . perspective”
What are the key operational attributes of “PERSPECTIVE” ? ? ? ?
– Space ——- here / there
– Time ——– now / then
– Scope ——- just this / all that
– Scale ——– zoom details / overview
– Realism —– actionable / art
– Efficacy —— operational / theoretical
– Social ——– personal / collective
– Volitional —- need / want
– Strategic —– compete / collaborate
– Tactical ——- player / defector
– Profit ——— monetary capital / social capital
– Values ——– secular / spiritual
– etc. . . . . . . .
I’m kind of visualizing “the colonization of perspective” as the ability to deliver goal optimized network topographies of custom filtered perspectives/dashboards which in turn scale up in a fractal fashion as nodes weaved into ever more global neural-networks of community perspective/intermediation.
Perspective is the momentary alignment of all of those attributes. It is in aligning perspectives that we are able to achieve ‘shared meaning’. And the discipline of Design Thinking is a means for accomplishing same — by leveraging a variety of approaches to experiment through a number of perspectives (perspectives that are also informed by ‘experimenting on the word’ — trying stuff out — not simply ‘accepting’ based on rhetoric).
I think you miss the amount of actual gain left to the consumer for their attention.
Whether it is GOOG, FB, or MSFT – we could easily see more than half their revenues quickly sucked up directly by end users dealing directly with brands that seek their attention.
And I think you miss the amount of waste in both time and money (taxes) occurring within the public sector.
I think I would rather see the product-brands dis-intermediated and somehow pay directly to GOOG, FB, or MSFT as they provide actual valve. Advertisers are simply interloping middle men who in the aggregate force us all to pay for these services indirectly, while executing negative control of our experience.
I agree with:
“the amount of waste in both time and money (taxes) occurring within the public sector”
BUT
Let us not forget the private sector’s contribution to vast amounts of wasted time/attention/resources – BUILT IN OBSOLESCENCE – this is the mother load of all societal-transaction-cost analysis failure.
Responsible capitalism will, by political necessity, in the long run be forced to dovetail there corporate-transaction-cost analysis with our societal-transaction-cost analysis.
Fascinating read. I believe your point ultimately was that individuals or small businesses would be able to better satisfy an individuals limited attention span (or perspective) than corporations would. I’m not convinced that is actually going to be the case, but I suppose we will see.
Venkat – first comment here. I stumbled upon your blog a few months ago whilst googling on James Scott’s work and I haven’t regretted adding you to my RSS reader!
Great post – looking forward to the followup posts. I’m not convinced that innovation itself will cease but I tend to agree that the current corporate form is on its last legs. IMO this decline will also mark the final nail in the coffin for the high-modernist project and maybe even the entire Enlightenment project as John Gray argues.
What follows I’m less convinced about and the transition is likely to be very disruptive given the extent to which incumbent corporates and governments have a vested interest to keep the status quo going.
found a small typo:
Europe has been slowing down and Asia has been catching up been catching up.
Other than that… Unbelievable read!
took me several rounds .. and it will require a re-read.
fixed, thanks!
and some clarification on this:
“” Certainly corporations today seem far more powerful than those of the 1700s, but the point is that the form is much weaker today, even though it has organized more of lives”
organized more of OUR lives ?
A very thought provoking post, well-worthy of attention. I will definitely be looking at the books you’ve recommended, particularly for a more detailed understanding of the EIC at its apogee.
Perhaps the measure of Coasean growth should be the Human Development Index, or some iteration of it. It purports to quanitify indiviual human flourishing better than GDP or other measures of economic output.
http://en.wikipedia.org/wiki/Human_Development_Index
One of the things participating in the forums associated with the Early Retirement Extreme blog has shown me is that many thoughtful people who are disenchanted with the effects of the Shumpeterian corporation are struggling valiantly to define what a meaningful life in a post-peak-oil society would look and feel like. I don’t yet have a robust answer to that question; but I am alarmed by tendencies, noted in some of the comments to this post, for vast swathes of contemporary individuals to surrender their attention to activities that provide little more than distraction or low-grade entertainment. Corporations may yet succeed in clinging to power and reach by providing sufficient Soma and Feelies to the masses to forestall the widespread development of “the solar panels and wind farms of attention economics .”
“Perhaps the measure of Coasean growth should be the Human Development Index”
Maybe another good measure would be global social-homeostasis, as homeostasis is generally a good indicator of health in any complex living system.
A good proxy for measuring homeostasis in any complex system is distributed redundancy of form and function.
A workable metric for social-homeostasis could be the distributed redundancy of wealth, power, education and control.
Thank you for this; it has been incredibly useful.
I’ve got a longer response, but it’s going to take me a few days to write it; I’ll post a link here when it’s online.
I’m interested in better understanding what you mean by “perspective”, in terms of the scarce resource defined by Coasean growth.
Another word that comes to my mind is ‘love’, as defined by Yishan Wong: “Love is the efficient interaction between multiple complex systems wherein exchange of information or resources occurs frequently and with little or no loss due to friction or conflict in the exchange protocols”.
(http://www.quora.com/How-do-logical-people-explain-love/answer/Yishan-Wong)
In either case, Peak Perspective feels like an awfully enlightening state for our society to reach.
I’ve always been a little confused by terms like “attention economy” since I don’t see what is the property, the exchange etc. In economical relationships “attention” seems to be basically coupled to marketing which gets blown up to the level of the whole economy. Couldn’t one do this with several other terms used in economical discourse without originating there? Take “quality” for instance. You could certainly find an interesting story about quality, entropy and the laws of nature and this in turn becomes the new-big-picture.
Also peak attention or peak perspective are subsumed to peak time and it’s not clear what they add to the older time-is-money meme. Isolating a single concept and telling that it is what the society is all about seems wrong to me, not empirically wrong but philosophically.
Normally, I’d agree with you about not hanging a theory of the world on a single term, but “time” is a rare exception. It is such a fundamental and fertile variable that you can hang a lot on a time-based view.
“Quality” is simply not in the same class.
And yeah, it’s just another big picture view. It highlights some dynamics, de-emphasizes others. I am not claiming it is anything deeper. I find this approach very fertile, others may not.
I do in fact like your historicist story telling and the first part of your grand narrative ( 1600 – 1800 ) was simply great and the second part, touching modernity was still good, but the third part doesn’t show me anything profound and categories such as “attention” or “perspective” don’t indicate a paradigm shift or a justification of the hypothesis that the age of corporations is coming to an end and life-style design will be of major importance. It’s perfectly possible that those are just delusions of some Internet entrepreneurs who sell web-space for ads and I would like to know why this is not the case.
We don’t have a booming Wikinomy and we haven’t even seen major Open Source projects coming up in the last 3-4 years. Instead we observe a resurrection of the craftsman who delivers home made mini-products to App-stores. Is this the Coasean economy which is ought to replace the Schumpeterian of the industrial age?
Interesting question Kay! I look forward to Vankatesh’s answer.
Hugh McLeod’s global microbrand meme is a good take resurgent craftsman. The thing is this very resurgence relies on some of the skills (internet marketing, tribe building) of the lifestyle design crowd…
Personally I find time/attention to be a very functionally compelling metaphor.
Because time is such a fundamentally, visceral, zero-sum, inescapably egalitarian reality.
24 hours a day per customer, no more no less, use it as you may.
Time can indeed be exchanged for money, but time is the bedrock currency, it is like a gold standard it is much harder to counterfeit. Fiat money may be more fungible but lacks any real zero-sum control mechanism.
The singularly mandatory mediation channel that facilities exchanging time for money is attention.
Some agent or process must capture my attention before I will invest my time/money into it. The only way to monetize someones time is to capture/motivate their attention.
Upon a second reading a couple themes are starting to clarify though I am still having some trouble with the three labels, which I don’t think really speak to the themes intuitively. (I understand these came from other sources)
One of your final points, how each stage of growth is measured, seems to be one central theme. I disagree though that national GDP would be the correct way to measure mercantilist growth. GDP relies on the sames fundamental concepts as stock market growth and therefore both would be measures of Schumpeterian. GDP and other monetary metrics rely on a universal/convertible system that can reasonably standardize disparate forms of production into comparable units. A mercantilist economy in which only a small portion of the population is meaningfully participating in global trade doesn’t meet that standard. Moreover, if production capacity is zero-sum, then growth metrics don’t apply.
So that seems to be one theme, the shift in the relevant productive unit (territory –> standardized units of time/value —> standardized aggregates don’t make sense)
Related to the above point, there is a trend in the economic dynamics at play. In the Mercantilist era production capacity is fixed and control of it is therefore zero sum (though the existence of trade implies positive sum allocation effects). In the industrial era neither attention nor fossil fuels are effectively fixed in supply though both exhibit diminishing marginal returns. In the current era we often find increasing marginal returns (network effects). To use your terminology, the more people share a given perspective the more valuable that perspective becomes.
This post has definitely provided food for thought…
“the more people share a given perspective the more valuable that perspective becomes”
I may well have misinterpreted but I was visualizing growth in perspective as the increased relevance and efficacy of relationally linked sets of perspective facilitating a more symbiotic integration of personal, corporate, social and environmental transaction cost analysis under the influence of network-effect synchronicity.
Perfect analysis.
I will stay tuned. :)
Brilliant analysis and exposition. I’d like to see you turn your talents to a similar epic post on a Brief History of Money and Banking.
It’s all about protocols isn’t it?
A Corporation is one of the protocols of Finance Capital which define the Property relationship between the subject individual and the object (eg land). It was Bentham who pointed out that Property is in fact a relationship (something may be ‘the object of a man’s property’) and not an object as we imagine.
The other protocol of the Twin Peaks of Finance Capital is Debt: and the fact that our money is an interest-bearing credit object creates the exponential which, with the profit maximisation of the Corporation, has driven the environment and the economy to their current crises.
But Money is in fact a relationship as well, and banks as credit intermediaries are no more necessary than shareholders in a dis-intermediated’de-centarlised and networked Economy 3.0.
I think of the first – Capital – as Static Value, and the second – Money – as Dynamic Value, with Value being undefinable or definable only in relative terms.
My work has been in relation to a new generation of associative (mutual, interactive, reciprocal, consensual) protocols which may act as frameworks for economic interaction in a world of direct instantaneous connections.
ie a Corporation (=Private) and a Constitution (=Public) as Organisations reinvented through Public/Private framework agreements for self organisation.
I observe the emergence in use of such protocols for the classic Darwinian reason – that ‘they work’ – and I have been working on prototypes of next generation enterprise and markets for the last ten years or so, with a background including a Dot Com and a director of a global energy exchange.
It struck me that the work we are doing here may be of interest to you.
If so, do not hesitate to get in touch.
I am fascinated by money too, and have written a few posts about it, but haven’t understood it well enough to attempt an epic treatment.
You may want to try Gregory Rader’s On the Spiral blog. He often tackles specifically finance/money matters in ambitious ways.
New here, so apologies if you have already discussed it, but ‘Relevance Lost’ http://books.google.com/books/about/Relevance_lost.html?id=bpcpVLTl4boC
is about the history of the corporation from an accounting point of view, and the adverse impact of stock exchange reporting. The next step from the corporation as it is will require a change to the accounting mechanics, and that may well be the deciding factor.
Sorry for the cynicism but better accounting mechanisms don’t amount to much if there is no political will to enforce them.
I think that our core economic problem is the fact that the financial industry tail is now waging the industrial production dog.
The financial industry no longer focus on financing industrial production they just concentrate on leveraged arbitrage of their own paper assets.
They have deep captured the industrialist and political-governance flags. Absolute power corrupts absolutely and their corruption is busy killing the industrialist goose that laid the golden middle class egg.
What they fail to realize is that the concentration of wealth is not so much immoral as it is mathematically unsustainable in an organic network homeostasis kind of way.
Sorry for the rant!
It’s actually “Blitzkrieg”, not “Blitzkreig”.
fixed, thanks.
makes me wonder if any transformation at all can come from words and concepts about other words and concepts. i don’t think so.
My favorite example is Tom Sawyer’s perspective shift on fence whitewashing. All successful perspective shifting comes about that way. A lot of good marketing is that way too.
But I think you are thinking of more philosophical examples/enlightenment type transformations etc.?
AlanKay: “PointOfView is worth 80 IQ points.”
Shh… don’t give away the punchline of the sequel :)
How does nationalization fit into your history? In the oil industry, for example, I read recently that only 2.5% of proven oil reserves remain under private control.
It doesn’t yet. I suspect state-owned corporations share many of the essential features of regular corporations though. The specific history of the corporate/government relationship in oil, especially in the Middle East should be interesting to dig up. I’ll put that in the hopper for a future post perhaps.
This is an amazing post. I still have to think about it, but I just wanted to say I enjoyed it and will look forward to reading whatever you write next.
I’m reading the enigma of capital by d. harvey and it’s interesting how your post dovetails with it in some ways.
How do we measure Coasean growth?
With utility!
How do we measure utility? I have no idea.
Agreed that we’ve hit peak attention in the U.S. I’d argue that Facebook, Zynga and others are actually cannibalizing attention from other sources. We now have mom’s checking twitter at dinner time and teens texting while driving. Those companies have teams of people dedicated to finding and triggering those pleasure centers in the brain so it shouldn’t be too surprising that little Billy would rather play Farmville than talk with grandma at thanksgiving. ‘Bowling Alone’ touches on this but I think the problem has gotten much worse in the past ten years.
>What I predict will be the next phase shift is moving from a product driven company to a channel driven company. Companies will innovate on discovering new attention channels and then constructing an entire startup solely around best exploiting that channel….<
I agree with this and foresee increasing investment by marketing divisions on "channel" discovery through the use biomarkers for attention. These biomarkers have already existed in the form of fMRI and electrocorticography, which can visualize and record data from a brain making decisions and shifting attention in real-time, and can be used as surrogates for attention to different "channels". For instance, the channel for "no" attention–the default mode network–is well-described default mode network. Using biomarkers as surrogates for attention to each channel, companies will be able to design modalities to specifically appeal to that type/degree of attention AND will be able to test whether or not it is successful in the time it takes to do an fMRI (15-30 min). This will avoid the need to even produce enough products for a beta edition to test in a sample population, which is the current model. There are already models in which functional brain imaging can be used to pattern, model, then predict decision making in a gambling task, which is essentially assigning a utility factor to attention: see Glimcher
Your description of the relationship between business and technology is dead on, as is your tying of Schumpeterian growth to easily extractable fossil fuels. The story of the modern corporation is in many ways the story of oil. It’s probably no accident that “Standard Time” sounds a lot like “Standard Oil”. It was the logistics of moving oil that turned railroads into the standardized (and regulated) machine they eventually became. The internationalization of energy companies is also deeply linked to the modern international political and financial system.
“Today the invisible web of container shipping serves as the bloodstream of the world. Its foundations were laid by the EIC.” – Perhaps trying to visualize what the “buried foundations” of today’s system might look like could be a fruitful train of thought. Information alone does not keep people fed or warm at night.
I bet there are historical detailed trade route maps around. Here’s a visualization of container shipping.
You make thoughtful points here. Thank you. But there are a lot of logical leaps, and so the post feels more like a buffet of clever ideas than an explanation of what is actually happening.
Whether “peak attention” exists in a meaningful way is an interesting thought. But, as the comments on mindfulness show, proving its existence requires more than anecdotes about vacuum cleaners.
Whether consumption-driven economies will stall when/if “peak attention” arrives is also an interesting thought. But that link isn’t obvious. If you have books on your shelf that you haven’t read then you know that one doesn’t necessarily follow from the other.
Whether corporations will fade when/if consumption-driven economies plateau is also another interesting question. But you haven’t shown that, either. Plenty of corporations have thrived, and continue to thrive, by finding ways to increase production rather than by finding ways to increase consumption. Agriculture and food science are large and growing corporate businesses, and it has nothing to do with whether people have enough time for both Facebook and Twitter.
Yes, economies have changed. They have changed from ones that measure success by their production (mercantilism) to ones that measure success by their consumption. Thinking of that change in terms of attention is interesting and meaningful. And there is probably another transformation on its way. But you are too quick to associate changes in the perception of wealth with anticipated changes in the forms that society creates to generate it. At least, you haven’t shown that one follows from the other.
The corporate form is fascinating and important, not least because its abstract nature leaves it totally untethered from social expectations or needs. This lack of accountability makes it versatile and it makes it unreliable. Your assumption that corporations will only be ever be able to do the things it has already done seems to miss its essential character — and to miss the part of its character that makes it most worth studying.
Thanks, now I know what bits to spend more time elaborating if I ever turn this into a book. Had to do some leaping around to cover 500 years in 7000 words.
I’ve been careful to say “traditional corporations” though. Of course the form will morph in Protean ways and lead to many non-traditional forms that may thrive. But to label ’em all “corporation” makes the term somewhat vacuous. New coworking spaces are typically organized as corporations for instance, but I don’t think they fit the spirit of the notion even if they fit the legal definition.
But more broadly, I think we’ll see some formal changes in the legal concept of corporation that basically reinvent it so drastically, they won’t look anything like traditional corporations, and will deserve new labels. Among the key innovations I expect is changes in intellectual property rights in employment contracts, dethroning of “shareholder value” and perhaps most important, some attacks on the foundational notion of “limited liability.” If these changes happen, we’ll be looking at fundamentally new beasts. Mammals vs. reptiles.
We’re on the verge of a Cambrian explosion of forms I suspect.
I’d echo those critical sentiments, and go further and suggest that this post doesn’t really address the fundamental nature of “time savings” and such, that is to extract more labor out of the same number of people (i.e. “workers”. See US productivity statistics for the post oil economy). The corporate form was inaugurated and maintained because of a logic of exploitation, that is it worked for the owners.
Also, the entire edifice of the Capitalist “order” and thus the corporation isn’t founded on consumption, it’s founded on wage labor. And before one labels me a Marxist (I am not) note that Adam Smith wrote of this fact in the Wealth of Nations (as well of course Proudhon).
If you feel a need to say your not a Marxist.
You may be a Marxist
Its a joke ;-)
Slow down dude. This post is almost a year old.
It may be a year old but no less brilliant or exciting for that fact.
I know I’m commenting to and empty room but this is the best blog content I come across in a long time.
Even the empty room is a joy to behold!
Is there an etiquette limit on comment volume. If so I will be glad to comply.
Am I hogging the front page new comment listings? Thats not my intent. If you can block my comment on that list go ahead.
I love your writing style. Out of clear thinking come clear writing.
I’m going to be working my way through all your posts.
Posting even against the empty room is still instructive to myself.
If that is a problem or annoyance I can read your posts and their comment while refraining from post my own comments.
Would appreciate guidance on this.
Thanks!
Much food for thought. Thank you for the post Venkat. If you have not already seen these documentaries they might be of interest – http://www.zeitgeistmovie.com/ . If time is limited start with “ZEITGEIST: ADDENDUM 2008” – http://www.youtube.com/watch?v=EewGMBOB4Gg
Peace!
Interesting history but don’t think the case you make for less power for coorporations is very strong though.
The only data I noticed in the blog is on the proportion of “free agents” and the proportion of life organised by corporate forms (don’t know what this graph really relates to or is derived from).
Let’s look at a braoder range of data.
1. Take the 80% of people who don’t live in the first world and you’ll find the proportion of free agents decreasing as people move from subsistance farming to working for corporations in the cities. i.e worldwide less free agents not more.
2. Look at the share of income that goes to labour and corporations (profit). With globalisation and increased sophistication of tax avoidance strategies we see a much higher proprotion of income going to corporations now compared to 20-30 years across the globe. i.e. more power to corporations.
3. A significant proportion of those that are “free agents” in the first world don’t want to be free agents. In some cases they have been pushed into being outside contractors for corporations without the legal benefits of laws and norms that protect employees. In other cases they simply don’t have a job as the work has been outsourced to a lower wage country. i.e. agents in these categories are unable to choose to be tied to a corporation. Trapped rather than free may be a better discription in these cases..
4. Even those that are true “free agents” in the first world live in a world that is far more domianated by corporations than the free agents of yesterday (or indeed the free agent subsistence farmers of today). Try selling your product without using a corporations payment system, try using the internet without relying on a corporation, try moving around at any signficant speed or distance. We live in a much more interdependent world than 20,50,100 years ago and corporations provide much of what we depend on.
5. Consider the relative freedom of capital (predomiantly controlled by corporations) and individuals across borders. Capital has the power to move freely and easily. Individuals only have the power to move if they are tourists i.e. to spend money not to earn money.
I agree the centre of gravity is moving to Asia but there culture has less concern with individuality and freedom and more focus on the group. Surely this suggests corporations whose form gives less power to the individual.
The first graph is completely made up. The second graph is real.
I think the quantitative data are inconclusive in determining whether corporations are declining or not. Pankaj Ghemawat’s World 3.0, which I am reading now, has very extensive relevant data if you are interested. I will review it shortly.
The judgment depends on the narrative analysis, which is what I have attempted. It would be interesting to see a counter-narrative that presents the antithesis.
I have deliberately not attempted to define a data-driven and legible notion of “power” or “reach” because I think the future will depend on a far more elusive narrative sense of power. It is the sort of power we are talking about when we say that the killing of Bin Laden is a psychologically important turning point. We recognize that this is significant, and we need narratives to figure out whether Al Qaeda will grow stronger or weaker as a result.
The history of corporations is chock-full of such events of narrative significance, and there are a significant number that have occurred very recently, and we will not have the data to judge the impact for about 10-20 years. So in the meantime, it’s a debate between competing narratives.
Your own arguments illustrate that: you are weaving in arguments about things like Asia being more collectivist than the West. I don’t want to debate that particular point, but am just highlighting that the counter-narrative you are proposing is epistemologically in the same bucket. As I said, I’d like to see that counter-narrative worked out in comparable detail to this one. I am probably not the right person to do that since I lack the right perspective to make the best-case argument there.
The future is getting so hard to predict that we’ll have to make up stories about it and wait 20-30 years to find out which story turned out to be true? The winners in that scenario will be the ones making up the stories. Narratives are useful for discussing possibilities and forming opinions. They’re banners under which various opinion groups gather. They can be important for organizing human effort, but in modern times they are functionally more like marketing than consensus. It takes a long, long time for a story to wear smooth like a stone, and by then it says more about human nature than the future. The more recently a story was created, the closer it is to spin, if not outright deception.
There’s been some buzz lately about how people want products with stories, rather than disembodied chunks of stuff with no motive for existing. It’s easy enough for a corporation to hire an ad agency with screenwriters on staff though. What people are really missing is some sense of belonging to a community, after moving away from friends and family, job hopping, buying entirely Ikea, perhaps having nothing in their life older and more stable than 80’s nostalgia. It’s not going to get fixed by people quitting their corporate job for a chair at the shared workspace. The way people form community needs to be repaired first, and it will take decades.
People don’t have the attention span to achieve mastery of a hobby anymore, and not just because of Twitter. By the time you can fit 5000 hours of practice into your free time, the skill won’t be valuable anymore. People are stumbling forward one small goal at a time, gamification-style. Hence the agile startup: a dozen people throwing out speculative prototypes, shutting down failures quickly to try the next thing. It’s not planning, it’s scouting.
You’ve hinted at Buddhism and point-of-view, and this does seem to be a possible path. Personally I think Buddhism will soon begin absorbing the exploding number of U.S. atheists, and will colonize the coastal elite. Over decades it may rise to about half the population, as blue voters abandon Christianity to red states as just another cultural marker, comparable to organic groceries vs. hot dogs.
It’s nice to stumble upon such a high-quality piece of writing in my usual low-grade web browsing–bravo! I don’t have much to add on the macro level, but on the micro level, my recent experiences track nicely with the concept of Cosean growth, and peak attention:
In addition to working and being a dad, i’ve been studying Tai Chi for the past 18 months. Making it part of my daily routine has brought mindfulness to bear on my typical activities, and it’s fascinating to note where my time goes. Now i’m finding more time to spend on Tai Chi and Qigong, which entail mindlessness, in the form of being within oneself, which means a retreat from the information deluge we are all swimming in daily.
What I think is amazing is how this ‘ancient technology’ answers so much of what is ailing society today, and I wonder how many other ancient technologies which have been discarded by modern society as somehow being outdated. There is so much to learn from earlier cultures that has been deprecated by the corporate machines that are the most visible drivers of society these days, and that is where I see people moving as the bubble pops. I’m obviously an outlier, and don’t think there will be a mass Tai Chi craze, but certainly, there will be a yearning for this type of activity as an antidote to the synthetic corporate wisdom we’ve been force-fed. Part of the corporatization of humanity has been the deprecation of these types of activities, because they are not easily profitable on the corporate scale. I think Cosean growth is the recognition of people themselves recognizing the sublime and qualitative aspects of being human.
“Politics is mostly indifferent to and above [technology].”
“Indifferent” should be “ignorant”. Politics is usually too myopic from self-important posturing to be bothered with technology.
Venkat, you really need someplace online where you list all the books you’ve read, ideally with links back to blog posts in the cases where that’s appropriate. Whether it’s a page on the blog, or a GoodReads account, or something…
So.. have you read
* Perez’s TechnologicalRevolutionsAndFinancialCapital? She deals a bit (I’ve just started it) with the lag of regulatory/cultural adaptation to technology, but the necessity of adjustment for an innovation to really fully flower.
* Castells? Seems to be a big kahuna of the future of a Network Society, but his writing style and volume have kept me from digging in….
Working in a “communication” company ( formerly an “entertainment” company ) I see where you’re coming from in the concept of attention mining and attention as a resource. My concern with this as a fundamental economic is that not all attention is equal. While each person has only 24 hours of attention per day ( less considering necessities like sleep, sustenance, etc ) the initiative and action of that person determines how effective or worthwhile that attention will be. While in a broad aggregate all attention IS equal ( averaged over the whole ) individual attention is a far trickier concept. My father, for example, watches a tremendous amount of television and accomplishes very little as a result of this relax time ( his monetary expenditure from adverts, etc notwithstanding ) whereas I watch very little, spend far more time on the internet, and as a younger and more energetic individual consider my attention more valuable in that I will have that attention longer ( presumably as I will live longer than my father ) and I have more energy and strength to direct with that attention. While our niches are certainly different my main concern of this measurement is the amount of effort needed to capture even tiny bits of my attention are not economically viable and I think the majority of “useful attention” ( that is the attention that will result in a desired action by whatever entity is vying for it since someone that gave attention to an advert but did not buy the product or engage in the advertised activity is wasted so far as the entity is concerned ) is shifting away from a capturable medium due to your aforementioned internal crap filtering mechanism ( How many people really pay attention to an irritating flashing sidebar with giant letters anymore? We filter it out, it’s obviously crap ). I guess my point is the fundamentals are changing but not in a way that current business can capitalize on, in which point we are in agreement, but I’m not certain any business model can capitalize on it. No one makes money from the couch potato if all they do is consume entertainment without consuming product. A business cannot succeed simply by capturing attention unless there is another mechanism whereby that attention can be directed to profit.
Yes, not all attention is equal. But that actually strengthens the case for scarce-attention economics. If we all had 18 hours of peak, high-creativity attention available, with no switching costs, attention would still be limited, but with a higher limit. Switching costs, low quality attention etc., all make the economic pie even smaller. I think of the time-attention relationship sort of like the energy-exergy distinction.
As an armchair-geopolitics-nerd, I found this to be very approachable and (the best part) riddled with jumping off points for discussion, and presented without the zealot’s froth.
What an absorbing piece. Thanks for the care and attention. Consider yourself followed.
I contend that the colonization of time is far from done, given the new fuel that is information. Social data is a case in point. Beyond simultaneous status updates across families and groups, social data pinpoint individual needs and it is up to suppliers (corporations or otherwise) to cater to these needs, one-to-one.
In addition, mobility brings new approaches to record keeping in the economy. Smart mobile technologies provide verification of time, place and identity. I can see a time when real time accounting transactions are recorded as people go about their business. This means the ERP system and general ledgers are updated as people place orders, receive goods, transfer money… via they mobile devices connected to the cloud where truth resides, thus cutting out a layer of clerical staff in the process. Information/Analytics will continue to drive innovation and transaction efficiency.
Hi!
This was a really great read, I look forward to your upcoming posts.
I find the conclusions especially interested given what is being discussed all over the art world today, that is a structure of being an eternal free-agent who is exploited by the highest bidder – ie the artist must hedge his or her investments in various jobs and people to succeed, rather than ever being able to rely on a single income source. It’s a confusing situation, but I hadn’t taken the perspective you call “Coasean,” which seems to predict this problem and offer a possible way to manage it.
In your history of the EIC I wonder if you ever looked into the history of the Hudson’s Bay Company (HBC) in Canada? This Corporation is one of the big differences between the history of the USA and Canada. The HBC was started in the 1600s as a trading company for inland Canada, to basically explore and colonize the country through trade. Like the EIC it was a corporation granted power by the crown, acting as a governing body in places that otherwise had no government, and got up to some terrible terrible deeds, but Canada would not really exist (as it is today) without it.
Funnily the HBC still exists, as a lame department store!
The wiki article:
http://en.wikipedia.org/wiki/Hudson%27s_Bay_Company
Fascinating. No, I don’t know much about the Hudson Bay Company, but the story does not surprise me much. The Plymouth Bay Company and the London Company did effectively the same nation-seeding thing in the US. None of these companies became trading behemoths like the EIC and VOC, but they had an equally big impact by booting-up North America.
In the US case, these two companies created 2 streams of migration, along with 2 others (the Quakers and the mountain folk) that together could be said to have created the modern US. There’s a great US history book from that perspective by David Hackett Fischer, Albion’s Seed(see my old post The Missing Folkways of Globalization )
Life Inc. by Douglas Rushkoff describe in much better detail the purpose of origin of corporation form of business.
Thanks for deleting my comments!
“Foucault discovers in Kant, as the first philosopher, an archer who aims his arrow at the heart of the most actual features of the present and so opens the discourse of modernity … but Kant’s philosophy of history, the speculation about a state of freedom, about world-citizenship and eternal peace, the interpretation of revolutionary enthusiasm as a sign of historical ‘progress toward betterment’ – must not each line provoke the scorn of Foucault, the theoretician of power? Has not history, under the stoic gaze of the archaeologist Foucault, frozen into an iceberg covered with the crystals of arbitrary formulations of discourse?”
– Habermas Taking Aim at the Heart of the Present 1984,
Your previous comments (posted as uchicagoman) were pure trolling.
You are welcome to post here so long as you keep it civil and there is actual content in your comments.
Fair enough.
No mal intent, just late night commenting with a glass of wine.
Your thoughts are interesting (and entertaining), thanks for sharing.
http://scientificpearlsofwisdom.blogspot.com/2011/06/illusion-of-free-will.html
“As far as I can see, all he has to offer are brilliant redescriptions of the past, supplemented by helpful hints on how to avoid being trapped by old historiographical assumptions. These hints consist largely of saying: “do not look for progress or meaning in history; do not see the history of a given activity, of any segment of culture, as the development of rationality or of freedom; do not use any philosophical vocabulary to characterize the essence of such activity or the goal it serves; do not assume that the way this activity is presently conducted gives any clue to the goals it served in the past.”
– Rorty Foucault and Epistemology, 1986,
You are a very good reader. And 7,000 words is an impressive number of words. But I think your analysis is wrong because you are essentially caught up in a herding impulse.
It is globalization that is at peak attention, and it is globalization that will soon come to an end. The age of the multi-national corporation is merely transitioning to the age of the personal corporation. If anything, the corporate structure will therefore spread.
But personal economic activity (what you term the “personal corporation”) doesn’t necessarily involve the spread of the corporate structure as it’s discussed here. Specifically, key aspects of the corporation (for the purposes of this analysis) like public ownership and a legal status that is completely distinct from actual individuals are not necessary (or, I would argue, even likely or helpful) for individual-scale economic activity.
The term “personal corporation” meant to describe people doing business as single-person entities and sole proprietorships.
Anyone who has run a business recognizes the necessity of a corporate structure to protect their personal assets from liability. That is why the LLC (technically a company with a corporate structure) has become the most popular entity for organizing business and investment activities. It is also why limited liability entities exist in business law worldwide.
Therefore, the growth of personal economic activity will ensure the growth, not the decline, of the corporate structure.
Hopefully, however, this will ensure the decline of globalist dogma, their failed currency experiments (the Euro), and their supranational mega-companies.
@ marz bonfire
An LLC probably has more in common with a partnership than anything else, and its open-ness in terms of constitution and ease of use for collaboration is IMHO the key reason for its success.
It’s actually mis-named as a ‘company’ because it does not have the principal/agency management problem of all conventional Companies, whether they are ‘for profit’ or ‘not for profit’.
And, while it is a legal person, it is not technically a ‘corporate body’ because an LLC does not have a ‘continuing’ legal existence, since it must always have an expiry date, like a lease.
But I agree it’s a very useful entity indeed, emerging because ‘it works’ in practice.
Fantastic post. Very thought provoking.
A few thoughts:
The early 16th Century also contained two powerful revolutions that enabled mercantilism and boosted the western world: 1) the printing press and 2) the Reformation. You could argue that these were also the seeds of unlocking each individual consciousness that you allude to later in your text.
The problem with perspective, for most of us that don’t innately have it, is how to develop it. This can happen in three ways: 1) erudition, requiring lots of reading and hard work; 2) networking, being able to draw on insights from apparently unconnected areas and 3) drugs, ranging from absinthe to alcohol, hallucinogens to the boom in psychiatric prescriptions. But even these require something else, call it synthesis, which itself really seems like a synonym for perspective. This highlights that trying to pin down the meaning of perspective, let alone develop it, runs into the dead-end of a tautology. I think I know what you mean by perspective, but it is difficult to articulate. Perhaps what is meant by perspective is differentiation, the so-called competitive (or comparative) advantage.
Your narrative of history is very compelling in highlighting the transition from the mercantilist model monopolizing the factors of production as well as geopolitical power to the Schumpeterian model of innovation. But the transition from a Schumpeterian model to one that moves away from the corporation, using the resource of perspective seems less obvious for several reasons.
First, perspective, one could argue, arrives from the margins of society and accepted thought (e.g. Kuhn’s theory in the Structure of Scientific Revolutions) , once it becomes mainstream it loses its perspicacity and is simply common knowledge. Also, while the intuition of the product life cycle is a powerful leit-motif underlying most analyses of the evolution of a corporation, it’s not clear to me that there is a link here between innovators and adopters. Lifestyle businesses are either for the very intrepid or those no better options, as mentioned by one of your commenters. According to your Gervais Principle, until mankind becomes less populated by the Clueless and Losers, the entrepreneurs with perspective will continue to be in the minority. While everyone knows of such entrepreneurs, it’s hard to see them becoming mainstream.
Second, unlike the romantic vision, perspective may not be the exclusive property of the individual, or of some loosely connected non-corporate structure. If we think of the edifice of marketing, it often depends on huge reservoirs of erudition (a.k.a. databases) and networking that can only be found in a corporation. Your thoughts on diminishing returns to mining additional time or attention to me suggest that marketing, rather than perspective, increasingly is the vital skill for survival.
Furthermore, one could argue that success in business has less to do with perspective than managerial skill. That is, many people can have an idea (e.g. of a search engine, MP3 player, mobile phone, social network, etc.), but few were able to execute the idea. Of course you could say that the skill of management does not need to be in a corporation or that success in business is really random, i.e. someone eventually wins the coin-flipping championship. But it seems like less of a leap to say that for organizing resources effectively in our increasingly complex and globalized world, one will see a tendency towards stronger forms organizations. As evidence of this, one has seen over the last century or so a strengthening of the nation state. Perhaps I am coming to your same conclusion but from a different angle by saying that if corporations are supplanted, it will be by nation states or multilateral institutions, rather than lifestyle businesses and people with perspective.
I haven’t yet gotten to defining and discussing perspective economics… this article was in a way a long prequel to that task. But you are right. Perspective is fundamentally harder to teach and develop in systematic ways. Industrial-style education isn’t a great tool for that job except at the graduate school level, where it at least gets out of the way if it doesn’t actively foster it.
But my main argument is going to hinge not on the difficulty of individual perspective shifting in the normal sense of cognition, but perspective in the sense of corporate views of markets, and the shapes they assume — brands — in response to what they see. When what they see gets confusing (as markets are today), their brands become incoherent, like a desperate Boggart from Harry Potter shape-shifting rapidly to respond to an inchoate audience.
As a quick preview, I am going to build out the idea that corporations are basically frozen, valuable perspectives that induce markets and complementary stable brand narratives. These stable brand narratives that are a source of strength in Schumpeterian markets become liabilities in Coasean ones. The bottleneck is not in the ability of individuals or organizations to adopt valuable perspectives, but their limited abilities to successfully reshape themselves in response.
The idea of a “fluid brand” is a contradiction terms, and that is the problem that will bring down first traditional marketing and then Schumpeterian markets as well. What will take its place? Well, stay tuned for my perspective on it at least, which may not be the correct one :)
More then 90% of the businesses are small business, having 5 employers and 1 owner who also works. The writer mistakenly thinks all businesses are big, Microsoft, Apple, but this is not true. So most people already work in small groups providing what the customer wants otherwise they couldn’t function. I find this a little scary, communist article….
Careful swinging that communist thingamajig around someone is likely to get an eye poked out ;-)
gd site
see bulls (J Rodd jurs, maybe Faber, Sor ros) on P R C hina
vs bears Jim C H A N …os.
web “U { S. total debts $200t. two hundred tril = tom, 12 zero,
gdp$14t/yr. West go’v’s borrow only to pay int., cant pay prin.”
gd site plz expand.
post once?
see bulls (J Rodd jurs, maybe Faber, Sor ros) on P R C hina
vs bears Jim C H A N …os.
web “U { S. total debts $200t. two hundred tril = tom, 12 zero,
gdp$14t/yr. West go’v’s borrow only to pay int., cant pay prin.”
“The human world, like physics, can be reduced to four fundamental forces: culture, politics, war and business.”
Says you.
But seriously this strikes me as an arbitrary set of divisions, and one that generates more than a few real problems.
One can think of many social behaviors, artifacts, institutions, and trends that do not neatly fit into one of these categories but instead fit into all of them.
It is also somewhat bizarre, given the nature of the topic (corporations) at hand, that ECONOMICS itself is left out of the fourfold categorical scheme provided, since it is economics (in the broadest sense: as the way in which finite resources are labor are divided, struggled over, conceptualized, monetized, etc.) that might well be said to be the very source of each of the four domains (cultural, political, war, business).
In other words, it may be that each of these domains is only a form of economics, and that humans are homo economicus. Thus, culture is a symbolic economy, and within it one finds divisions of power, labor, territory, etc.
(Over here because of Cory’s link – that guy has incredible radar).
This is fascinating. The stuff on the EIC is fantastic (and drew together a bunch of stuff I should have connected, but hadn’t). “Colonizing time” is a great insight into the transition from trade / mercantilism to industrialism. OTOH, it (for me) doesn’t capture all the other changes that occurred in the 19th century. At a concrete level, it’s at that transition where we went from Corporation as legislative (or royal) act to something anybody could do. There was also a huge political shift in how we thought about economic power / money / profit (which may be consequences of shifting from mercantilistic thought to capitalistic thought, but I have reservations about that). Clearly “labor saving” was a huge component in the shift, but I’ve never been convinced that things had to shift the way they did (in particular, turning “making huge profits” from sinful to virtuous, at least in popular thought).
I’m not sold on the “perspective economy”. Yeah, facebook is popular, but are you really willing to bet it’s something new? It could just be the success that the dot.com boom was looking for (with just the right touch of teenage pheronomes to keep it popular). At the time of Benjamin Franklin, journalism was all in on the perspective business. Religions have played that game since forever.
I will grant that “labor savings” peaked decades ago (when it became more expensive in personal terms to make enough money to buy and maintain the labor saving devices than they saved you), but my perspective is that we are re-examining many of those changes that happened in the transition from mercatilism to capitalism.
I will mention Hackett’s The Great Wave and Phillips Wealth and Democracy as very influential on my thinking.
You would enjoy the works of K.N. Chaudhuri
http://en.wikipedia.org/wiki/Kirti_N._Chaudhuri
Particularly the amazing book:
The Trading World of Asia and the English East India Company 1660-1760
This is a great post. However, I think that once everyone’s attention is primarily vectored through technological/virtual networks, it becomes an easy matter for corporations to disrupt and forestall peak attention by simply changing the channel of mediation, forcing individuals into increasingly unstable relations with their information tech. It is also clear that people find the challenge of (let’s call it) channel or network switching actually pleasurable, part of the fun, and something that makes human subjectivity more ludic — something that corporations are beginning to exploit in the most cunning ways.
You might find this post interesting:
http://semtexfollies.blogspot.com/2010/08/media-apocalypses.html
Includes consideration for Hubbart’s curves, but strangely, in almost xenophobic, American fashion, misses the energy story of the ages! The Chinese, Thorium fueled, plutonium free, benign waste product, high efficiency reactor designs – the ones that will power the electric bullet train networks and their associated humanity supporting, electric powered infrastructures, to be “Daisy-Chained” Pan Eurasian continent in the next few decades, by a communist oriented, communist shaded form of capitalism found in Asia, that has in fact won a great battle on the economic battlefield of the world, over the U.S.A. and now dominates world-wide, in site of U.S. media nonsense stating otherwise! Even the U.S. fiat, “Funny-money” is beholden to the Chinese, who at any moment can trash the U.S. dollar, and other wise, control its value simply by selling off American debts !
be forewarned! Western Theorists work at a decided disadvantage. They mire themselves in Western Propagandists notions, them spout theorem to prove histrionics. not so for Asians, they steep like teabags in communist doctrines, Asian Philosophies, then, from a different point of view they move in old-time communist fashion, ever forward by “Ten Year Plans” of the committees. So far, Asian methodologies have kicked western notions right out of line, and seem to continue to do so. Keep in mind, In the U.S.A., the pinnacle of Western Capitalism, schools were shamefully admitted by Obama himself to rate only 39th in the world.
A great post and a fascinating history lesson! Those (south Asians in particular) who forget their history are doomed…
However, you may have skipped over the primary inducement for the EIC and the earlier European bandits to set out from their homelands. It was black gold, and not of the fossilized variety, that stirred up their adventurism.
Arthur Wellesley, well before he became the Duke of Wellington and defeated Napoleon at Waterloo, was tramping through the equatorial forests of Malabar in south India and battling the local resistance, in an early predecessor of guerrilla warfare, to seize control of the ancient and lucrative trade in pepper and other spices for the EIC.
It was the lopsided trade in these commodities that depleted the coffers of the Roman empire, as you alluded to, and built the wealth of the Indian cultivators and the Arab middlemen who profited mightily from the trade with Europe during the middle ages. The Hindu rulers of Malabar and the Arab sea-traders had a peaceful and thriving business arrangement that was in stark antitheses to the mass killings, bloody raids of plunder, and the dogmatic iconoclastic destruction that the subcontinent’s north faced.
This mutually beneficial system was, however, deeply shaken in 1498 when Vasco da Gama first navigated the hitherto secret spice route to Malabar and fought the Indian/Arab alliance that he met there. Other European powers then followed to assault this breach; the British were relatively slow off the start. Later on, the jihadist onslaught of Malabar by Mysore’s Hyder Ali and subsequently his son,Tipu, irretrievably fractured this alliance, especially after the Moplah descendants of the Arab traders turned and sided with the Mysorean invaders. The EIC then moved in, ostensibly to help the Malabari guerrillas resist the Mysoreans; only to renege and take control of Malabar from the greatly weakened Hindu rulers after Tipu was defeated.
Wellesley then spent a few futile years chasing the remaining Hindu guerrillas who resisted the EIC takeover, before going on to greater “glory” in the battlefields of Europe. His successors in the EIC eventually hunted down and killed the leaders of the remaining resistance; which set the stage for the EIC’s takeover of the rest of India and its subsequent dominance as a global mercantile corporation.
Actually pepper was never quite as big as textiles. Even within the spice trade, control of Indian pepper was a distinct second-place prize compared to control of the Indonesian island spice trade that the Dutch had (and consolidated in a trade where they ceded New Amsterdam/New York for a British-controlled island in Indonesia after the Anglo Dutch wars). The EIC had its eye on Bengal and textiles very early on as a bigger prize, starting with its early trading post in Surat on the west coast.
Wellesley’s campaigns came after Plassey and after the Crown took over from the EIC (his brother Richard was the third Governer-General). The Mysore campaigns, which ended in 1799, were more about circling and attacking the core of the dying Mughal empire, eliminating French influence in the Deccan in the run-up to the Napoleanic Wars in Europe, and establishing a line of control all the way up through Maratha territory, Punjab and into Afghanistan, where the Great Game against Russia was already starting to brew.
This was also a preliminary move to comprehensive control of the Middle East and future action against the Ottomans.
It isn’t that pepper wasn’t important, but that other things had become more important by that time. By the time the Mysore Wars happened, the game had gotten much bigger. At that point control over the spice trade was almost an after thought. The strategic goal was no longer trade. It was complete and pre-emptive control of the geography and economy of South Asia.
Your argument would be correct if Wellesley’s campaigns had happened about 100-150 years before they actually did.
Damn it, now I have more books to read :)
The EIC has many fascinating aspects. Two questions, in particular, have been at the back of my mind for some time.
The first is a variant of Yali’s question (of “Guns, Germs and Steel” fame): how and why did the EIC colonize India, and not vice versa?
After all, India had none of the disadvantages of sub-Saharan Africa, the Americas, New Guinea and Australia. Civilizational processes proceeded at roughly the same clip as the rest of Eurasia, so it was not a culture shock of several centuries which hit India, unlike, say Atahualpa’s Inca empire. Even in military terms, they were by no means hopelessly unequal. Arthur Wellesley (later the Duke of Wellington) and Hugh Gough, among the greatest military men of their day, nearly had their asses handed to them on several occasions – Assaye, Mysore, Sobraon, Chillianwala.. Many Indian rulers had their armies trained by Europeans. The Sikh army, for one, was more than a match for the EIC in training, equipment and courage.
And yet, it seems to me that even if the EIC had been less lucky than they undoubtedly were, even if they had lost a few more crucial battles, they would still have come to dominate the subcontinent, with a sort of Seldon-like psychohistoric inevitability. But that’s a tale for another day..
The second is, how did the EIC avoid the pathologies which plague the multi-national distributed company of today?
The answer here is perhaps somewhat simpler. They didn’t. There was exactly the same kind of intra-organization politicking, jobbery, jostling for advantage, clueless idiots, incomprehensible directives from headquarters, inter-office rivalries and intrigues to rival. Bombay tried to sneak troops up to Pune to intervene in the Peshwa’s succession, a move stopped literally halfway through the ghats by Calcutta, which thought Bombay was getting too big for its boots. Only to have London support Bombay a few months later. London recalled Gough in favour of Napier after the disaster of Chillianwala, but by the time it was put into effect, Gough had already won a decisive victory at Gujarat. Warren Hastings got hauled over the coals for various misdeeds and spending the greater part of his fortune defending his actions in Parliament. And so on.
There were a few saving graces, though: long distances required much greater delegation of authority and much more latitude (and longitude!) to play Milo Minderbinder. There was enough time to place your bets, play the round to completion and present your distant superiors with a fait accompli. Then you show them the fabulous profits the company made. All is forgiven. And of course, everyone has a share.
The invisible hand works best in a growing-pie positive-sum environment, and the EIC pie was virtually exploding with growth. So even if others are making out like bandits, you don’t mind too much and are ready to co-operate, since your own opportunity to loot and title might just be round the corner.
The rest of your essay – especially the last cliffhanger part – needs a lot more digestion. I await future installments which go further into Coase with interest.
I stand corrected; I was off by over a century. I guess that spices weren’t as high a priority for the English palate of that time. Was it the battle of Colachel that sent the Dutch packing to the East Indies and inadvertently, for the Indians, led to a devaluation of their monopoly?
While Wellesley and his brother the GG served the Crown, I believe that on their return to England they had to defend themselves against the charge that they embarked on wars that served the EIC’s business interests.
Great writing! Will take some time to fully digest.
“The first is a variant of Yali’s question (of “Guns, Germs and Steel” fame): how and why did the EIC colonize India, and not vice versa?”.
Great question. I got to pose this to Jared Diamond many years ago when he was promoting the book; but his brief response was not entirely satisfactory. Unlike China, where Diamond posited that its vast unified kingdom with a relatively smaller coastline was at a disadvantage in comparison to the fractured coastal European principalities and their frequent internecine wars, India at the time of the European colonization was more similar to Europe in both these regards. Diamond vaguely responded that the lack of Indian cohesion and unity may have left it open to European imperialism.
Personally, I think that it was a combination of events, with luck, as you mentioned, playing a big role as well as the lack of unity, strategic foresight, and science and technology being an intellectual curiosity rather than being put to practical use. The Mughal empire was at its last legs, and the Marattas or the Sikhs would have delivered the coup-de-grace in the North had just they been given some time. It was bad timing that the Brits got involved in this key juncture with some very capable military adventurers. They played the competing Indian interests brilliantly and ended up taking over the whole country.
A lack of strategic foresight may also have been key. For example, the Khyber Pass was the main route for many invasions in the North. So why didn’t any of the Indian rulers consider building a fortified wall, much like China’s Great Wall which was a considerably costlier and more difficult a project, to keep out the marauders or at least make it more difficult for them to move their armaments across the pass?
More importantly, science and technology in Europe was put to practical use in warfare in a more concerted and determined manner than it ever was in India or China. The printing press and the established network of publishers in Europe also helped disseminate the knowledge widely. Then, as now, the Indians and Chinese were content to sit on past intellectual glories and failed to capitalize on the knowledge gleaned.
I hope that Venkat will address this matter a lot more cogently than I ever could in a future post.
I am unspeakably grateful for the observations in this post.
Lightning at midnight is illumination, a lovely and graceful metaphor for enlightenment. Even a brief spark in Plato’s Cave must cast long shadows and cannot help but reveal the contours of the beautiful stone walls.
We do not curse the moon for failing to show us the contents of a closed box, nor should we expect the light of these handfuls of words to reveal this moment with complete fidelity. And how could they, given that the equation to describe even a single photon crossing an unencumbered atom requires pages and pages of numbers?
Oh, but these words illuminate so much.
If I throw my keys on a table, I can pick them all up by grasping any one, which is to say that a relational view allows one to order a collection of stones by color or weight or time of collection or density or reactivity or …
I feel that this writer has handed me the periodic table of the elements, turned on a light emitting diode in the cave, and said, “It’s all just vibrating atoms, and you can get rid of those epicycles on epicycles if you just see the sun as the center of the solar system.”
Thank you.
As someone from Cape Town, a city created by the VOC, I found your post very interesting, and it connected a lot of dots. Thanks, I’ll be back looking for more insights. But it’s not ALL maritime, as any African can tell you.
Interesting. Could you elaborate? I thought Africa (outside the parts that were already kinda colonized by Islam) was also primarily colonized by sea rather than land? Was it more like America, via land trails and displacement of native Africans?
Perhaps the unit of measurement is as the Bhutanese put it “Gross National Happiness”.
I’m sure it could be measured quantitatively via blood cortisol levels. I was thinking you could also use dopamine but that would likely be very difficult to measure.
This is one of those thought-provoking posts that has grabbed my attention and made me think about things differently on multiple occassions since reading it. It reinforces a number of ideas I’m working on related to rethinking organizational boundaries and the relationship companies have with their external and internal constituents.
Of all the great points you raise in this piece, it is the notion of corporate “conquest of time” that has had the biggest impact on me. It is a radical idea. It’s unclear to me whether this was a conscious undertaking, or simply an emergent quality of the market. An interesting supportive point that it was deliberate, however, is the unusual choice of the terms “durables” and “non-durables” to differentiate the relationship consumers have with a company’s products.
http://en.wikipedia.org/wiki/Durable_good
Non-durables (or consumables) are products that are consumed in one act (or session), while durables are consumed over time. This is one of the most fundamental methods of categorizing products in both economics and marketing – and it is based on time.
In the golden years of corporations’ conquest of time, two strategies for maximizing profits per hour of consumer time emerged, both focused on increasing flow of goods.
In non-durables, it was about amping up our rate of consumption. The “Mad Men” advertisers were kings here, with ever more “clever” tricks aimed at grabbing our attention. But product folks helped too, sugar-and-fat-coating our products to make them extra tasty. More, more, faster, faster.
In durables, the question was how to stimulate additional purchases of something that was supposed to last for a long time. The solution? Planned obsolescence and fashion. Bigger fins on that car, anyone?
I think one of the interesting elements of the shift now emerging in the corporate world centers on collaborative consumption and the move to products as services. Here, perspective (or context) matters a great deal.
Thanks so much for this post. It’s added a new dimension in thinking about organizations for me. Great stuff….
– Gideon
Only read a bit but this is the first I’ve heard of EIC involved in the slave trade. It actually was against slave traders (for business reasons – EIC had monopoly over transporting goods and it was about whether slaves constituted goods – something like that).
As I understand, the involvement of the EIC in the slave trade was indirect, via other companies, and only for a short period. Unless, I misread that bit in Robins book.
That’s what I understood as well…
Great article. Definitely bent some brain cells to wrap my mind around this framing of recent history. Solid stuff.
Measuring Coasian growth may not be possible until we understand the institutions that drive it, and those institutions are still emerging. “Perspective” is an interesting name for the domain of colonization and it resonates strongly with my own work in user-driven services and Vendor Relationship Management (VRM). However, I think until we understand the mechanisms that will create, extend, and maintain power based on perspective, the best we can do is guess at metrics. Facebook and Google are clearly drivers in this space… but are the metrics we use to talk about them the important metrics for measuring Coasean growth? Clickthroughs, users, time on page? Those are all attention-based measures. (Well, maybe not users, but that’s a thread I’ll have to leave for another conversation.)
What I find most stimulating about your article is that it makes me think about the institutions that are emerging (to wield power) in the age of perspective. The emergent power isn’t going to be about mercantilist control of space (and trade) nor schumpeterian control of time (and attention). The institutions of those ages will solidify into infrastructure and context. Their legacy becomes the shoulders of giants for the age of colonizing perspective. Still relevant, but not driving the new power base.
To me that frames the interesting socio-political question: what are the institutions that will prove most effective at leveraging perspective? Those institutions will rise in power, the ones that figure out the sweet spot in the new framing. And they will likely be less formal and more organic, which is a lovely twist on Coase’s theory of the firm. The costs of negotiating are so low as to make the transaction costs of formal corporations an exorbitant expense for many efforts. Kickstarter and viral marketing and lean startups are eviscerating the traditional notion of centralized capital using centralized labor. Think Shirky’s _Here Comes Everybody_. The tools that let this sort of non-organizational organizing happen are incidental. The question is about the form of lasting social and political frameworks that maximize power from individual perspective.
The church, the monarchy, the race, and the family predated the nation state and the schumpeterian corporation as power institutions, but were almost certainly as transformative in their time. What’s next?
In the VRM framing, Doc Searls likes to say that a free customer is more valuable than a captured one. He writes of the emerging “intention economy”, one where the individual is at the center of integration, the moral authority for both the origination and control of data and services. In this world, smart companies don’t have to guess what individuals want then guess what channels to broadcast their marketing through. Smart companies build ways to respond to expressed demand and build enduring relationships that transcend individual transactions (which is how they earn access to demand expression). As I put it in regard to user driven services, it’s about maximizing value by maximizing user control and authority. The companies and institutions that figure out how to thrive in *this* domain will, IMO, be the ones who rise the farthest in the age of perspective.
Thanks for the great article. I’ll be sharing this catalytic piece with many.
Coasean growth will be measured as he himself has demonstrated it by number of years of productive life that one scores
Thanks. It is been a long time that I have been tickled :)
Привет всем!
Можите посоветывать нормальное казино ?
Задрали лохотроны…
Wow! So informative!
It must’ve taken ages to gather this kind of info… Thank you for sharing :)
Well I’m late in the game here, but what a wonderful article!
Coasean growth can perhaps be a study of people and the standard of living they desire to be happy. This and related data can give data about how many people have all they want, how many want more, what income classes have higher growth, where is growth higher, how many have enough to survive and how many don’t. It can also tell us how effective advertisers and corporations are at mining new areas of interest (if the Coasean growth factor goes down then perhaps a new iPhone is to blame….). If it severely goes down, perhaps rising oil prices and high cost of basic needs goods is to blame.
The great thing about this measurement system is that it isn’t a growth measuring model. Get rid of the growth model. This is a finite measuring system (it is say only 1-100 percent) so if we manage to reach 100% someday, we can stop acting like a spastic cancer cells and realize we need no growth for the time being. It removes the illusion of infinite resources of space and time. It also helps us measure how many people are meeting their right to life, liberty and the pursuit of happiness.
Thanks for the very insightful article.
However, I think this entire discussion seems to have moved to a place that is utterly free of personal values or about what activities provide meaning in one’s life. The fact that we might be able to quantify happiness doesn’t mean it should be done, since the very act of measurement seems to lead to a society-wide drive towards self maximisation, and efficiency, which fundamentally changes (and I would argue reduces) our ability to be individual human beings. Following the logic of efficiency and maximisation, it seems to lead to a society of purely rational automata dictated by the drive to a proclaimed self-obvious goal. Instead, we should abandon this logic of measurement, and provide ways of life that allow for a plurality of logics and ways of life. I, for instance, would quite like to live a slower life that involved less breakneck-speed change, enable me to develop ideas, relationships, empathy, over the long-term. The economy provides a context in which I can act out part of these goals, and others theirs, but only within a wider community, city or social context. The economy would be a place of developing human relationships and connections.
Guess that makes me what you might call “Conservative”.
The issue I’m raising is that we’re missing something fundamental when we reduce human experience to quantifiable data points. In my view the privilege that this logic is given should be at least contrasted with the qualitative and more linguistic understandings that can be found in the areas of ethnography, history, and sociology.
In fact, reducing a measure of people’s happiness is downright dangerous: are we going to be forced to be happy? What purpose does life have if there is not some personal struggle, adversity, some context in which to put the happy moments? Would we want to live in a place of permanent bliss stasis? What of those who wouldn’t?
If the current system is to be shifted, it should see itself as subservient to a larger system of human life, where growth (higher or lower) is treated as a curiousity or an incidental fact rather than as a desirable outcome in itself.
:)
“But there is no meaningful way for a businessman from (say) 2000 BC to comprehend what Mark Zuckerberg does, let alone take over for him. Too much magical technological water has flowed under the bridge.”
I like your article but wish you hadn’t said this. If you have ever worked in a high tech industry you would have, I think, a different opinion of the people who run things. Businessmen run businesses; the exact nature of the business is taken care of by us drones.
Thanks for a brilliant and thought provoking article.
I wonder if the next phase of the evolution of human societies may be more radical than outlined here. Emerging genetic engineering technologies should soon have the capacity to fundamentally change what it means to be human. It would introduce two new dynamic forces. One would allow a single society/culture to become more efficient and cohesive by making each of its members more highly specialised in their roles. The other would allow different societies/cultures to more highly differentiate themselves from each other, potentially spurring conflict. The two forces of specialisation/integration and differentiation/division would profoundly change society.
I personally suspect this drive in genetic engineering would be enhanced by a slow decline of oil/coal based machine technology, provided we can maintain the necessary complexity in society to keep scientific innovation alive.
So I read this all over again (not for the last time, I’m sure), making a little more progress. The characterization of Schumpeterian growth as colonizing time is particularly insightful. Still mulling over whether I buy it completely.
Have you considered the relationship between colonization-of-time and crashing population growth rates? It seems blindingly obvious that drop in personal time translates to fewer babies (so obvious that I am instantly suspicious of it) Will China and India hitting Peak Attention finally result in a reversal of world population numbers?
Nevertheless, I think you are being too optimistic that India and China will reach Peak Attention anytime soon. The percentage of workforce involved in agricultural production is still in the high 60s, while most developed countries have it below 20. While TV and mobile telephony have succeeded in colonizing their time to some extent, it is far from clear to me that they will be as completely mined in a decade as you seem to think.
I’ve heard 3 different arguments for declining birth rates. None of them is very tightly linkable to the time argument, but each is sort of broadly related.
1. Pure economics. In the developed world, raising a child from 0-18 (forget college) by expected social norms of “good parenting” is becoming out of reach for many. Just like the median home price in relation to income has quadrupled, babymaking price has quadrupled I would guess. The way this manifests itself is that people delay having kids till they can be sure they can raise ’em right. For many, this translates to ‘never.’
2. The narrative idea. I recall this from the guy who used to blog under the name ‘Schumpeter’ on Asia times. He argued that there is now less pressure, in fact active anti-pressure, from the grand narrative of the west, to have kids. This goes with the decline and death of the west’ meme.
http://www.atimes.com/atimes/Front_Page/EA11Aa02.html
3. My own preferred explanation is the rise of individualism. There was a saying that “you can either give birth to yourself, or to someone else.” Used to be that an energetic person could do both. Now increasingly, you have to choose, because the rewards of individualism are getting costly enough to preclude kids, unless one of a couple is willing to be primarily a parent.
India and China may never reach peak attention in the sense of the West. A subsistence farmer directs low-value attention with a lot of energy, and a minute of his time is much less “dense” with high value attention than say, a physicist designing an experiment at CERN. They may be equally smart, but the latter is calling upon a kind of attention that is highly specialized, and in our time, valued like 1000x more. Or you could say that the latter is at most operating on the basis of the cultural memory of a single tribe, while the latter is operating with a lot more. So education levels (broadly speaking, not in industrial education sense) dictate the magnitude of peak attention. You can saturate the attention potential of a low-standard-of-living culture a lot faster than a high-standard-of-living culture.
I am now seriously thinking about this argument in more philosophical terms. Is attention potentially a boundless resource if cultivated properly? If we all became vipassana-meditating monks, would we have done the equivalent of discovering nuclear fusion for mindfulness? Moving from low-grade attention economics (coal = today) to high-grade (fusion)?
Test post.
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“But there is no meaningful way for a businessman from (say) 2000 BC to comprehend what Mark Zuckerberg does, let alone take over for him”
I see no reason why not.
“We run a large news distribution service, similar to town criers, or the Papyrae of Alexandria. Like criers, the fundamental mechanism of making money is attracting attention by providing germane information to the populace in a timely fashion, and interspersing advertisement messages from vendors who seek to acquire new customers, and are willing to pay for the possible privilege. The difference is that we use a machine which transmits the information in a fashion similar to scrolls, but so cheap as to be effectively free, and changing instantly with no new materials. Think of it like the changing paintings of Zeuxis, if the pieces that changed were single letters, instead of marionettes of people. Now consider that each of our cities has a population ten times that of all of your ancient Greece, and that we have nearly a thousand of these. Consider the volume of revenue to be acquired. Add some shared games, a communication system, and a platform for other vendors to invent their own new things within your scroll’s context, like a bazaar, to let them take advantage of your people while you take advantage of their innovation. You have now invented Facebook.”
Bang. He’s got it.
There is nothing new under the sun. Virtually none of what we do would be difficult to explain to the ancient Greeks, who had the concepts (albeit largely hypothetical) of molecular chemistry, natural selection, calculus, rocketry, outer space, the mechanical calculator, batteries, the steam engine, and electroplating.
Seriously, all they needed was a larger population and a more effective mechanism to protect inventors (what we now have in the forms of trademark, copyright and patent) and we’d be Jetsons today.
Useful information. Lucky me I found your site unintentionally, and I
am surprised why this accident didn’t happened in advance! I bookmarked it.
First, sorry to high-jack the comments of a post that is appr. a year old. But that’s Venkats fault after all, he writing so much good posts that I don’t have enough time to read them all, especially that I stumbled over ribbonfarm only earlier this year.
And while I generally agree with a lot of what Venkat says, let me propose a different view on the fate of corporations. I for myself hardly doubt that they will disapear within this century. Corporations will more likely change along the changes in communication like trade (and what else a companies goog for if it is not trade on a larger scale with different goods?) always did.
One interessting thing that might influence the development of companies is the current crisis (what ever name you use, Euro-crisis or whatever). In 2008 / 2009 nation states bailed out banks and other huge businesses, but this didn’t prevent an economic down turn. Now in 2012 we actually see states in a need of bail-outs (argaubly these bail-outs are for banks again…). But while during ther last down turn we saw lay-offs and a sharp decline in some regions, global trade and production didn’t take such a bad hit. Some were actually killed, yes. And container shipping was hurt quite badly. But for quite a big part I tend to blame this on structural and fundamental problems as much as on the Lehman thing.
I think this will be more or less what will happen with the greece-Euro-debt crisis. What is interessting to note is that the biggest debt is now alocated to nation states. But will actually a bancrupcy of Greece prevent Toyota from selling cars to US citizens that still have a job? I don’t think so. But it will be crucial that said US citizens have a job, maybe at company selling parts to a company in, say, France that sells parts to Toyota.
What do I wan to say with this? That I think that global Companies, or more important, supply networks around big global companies, will grow even more independant of nation states.
A first climps on this can be seen on how the iPhone actually effects the trade balance of the US and China (I once read an article on it, sorry that can’t provide link. Baseline was that while Apple is a US corp. almost all iPhone exports are attributed to China, which in turn is only providing a small part of the actual value added work on an iPhone since a lot of components are actually importaed from Samsung for example). The authors may be wrong in some details, but the general tendency is, I think, more or less correct.
The free agents mentioned in Venkats article about companies have to orbit around something, and I think it will more likely be groups of companies associated in supply networks. And these supply networks will be the real power behind business and economy.
And now I realize that I actually agree pretty much with Venkat again… And hope that I didn’t confuse everybody with this rather long post on an old article, so feel free to block it if doesn’t add any value!
Bruce: Some great new perspectives to consider. I’m particularly smitten with the international economic flows. As we look at the speed bumps along the way (borders, regulations) we have to constantly reconsider the ‘value’ these edges provide and how they might be reshaped for perhaps ‘better’ results.
I think there are all sorts of economic theories and perspectives still missing for addressing these scenarios.
http://www.johnythegame78r2.com
“A Brief History of the Corporation: 1600 to 2100” was indeed a truly awesome article, .
Keep posting and I’ll try to keep on reading! Regards ,Alexandria
Thanks for one’s marvelous posting! I actually enjoyed reading it, you could be a great author.I will make sure to bookmark your blog and may come back later on. I want to encourage one to continue your great job, have a nice afternoon!
Great article/post. Glad I found it. I don’t entirely agree with everything, over all I think you hit some great notes.
I think you should add another dot to the right of business, and that would be technology. Technogy is the starting point. For Europe it was the firearm, and the heavy keel that allowed them to build the sailing ships. Together this gave the Europeans the ability to conquer the world.
Industrialization took production away from craftsmen, but much of that was due to the need for considerable capital for mass production. At the current time, this need for large facilities for production has been eliminated. At the same time, technology has developed to the point where those with the skills can far out produce those without those skills. Craftsmanship will once again become dominant.
About a century ago, technology brought us to the point where we could produce more than we can consume. The concept of attention peak could be more accurately described as consumer peak. Our current market model needs those consumer in the East more than they need cheap labor.
Much of current economic turmoil is a result of the giant corporate entities struggle to survive in a world in which they are quickly becoming obsolete. We could be working 10 hour days and still producing more than we can consume.
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Mr. V.,
I realize I am commenting 18 months after you made this post, so whatever I have to say may now be irrelevant to your project; however, reading your “about me” shows the seriousness of your project, so I feel I should contribute my reaction.
In the intro and first two phases, you summarize what previous historians have said, and recast some things; I knew this history in only the most broad strokes, so this was very valuable and interesting to me.
As you get into the second phase, and then very much in the third phase, the ideas begin to become more diffuse, more vague and less clear. I imagine that this is because you are using this forum for the working out of new ideas. In any case, when you begin talking about “attention,” I don’t know what you mean: Perhaps you mean only focused time, but I don’t see how you would distinguish “attention” from “time” (as in what used to be called ‘man-hours’) except by narrowing the definition of time a bit?
What is confusing to me about “peak attention” is the American problem, that we are reaching that stage in the history of capitalism, or in economic development, at which increased productivity and concentration of wealth have led to a crisis of time surplus – the service and consumer commodity economy in America is in trouble because the production side has no need of all the man-hours available, but this means that many consumers are increasingly unable to afford services and commodities, and so growth may be permanantly contracted. The largest corporations can simply move their “action” away from America – make things in Viet Nam and sell them in Brazil – but this is still a problem for many economic actors, who are not fully globalized. Will they simply die off? Will they have the power to bring some kind of economic action back to the debt-ridden American consumer, who works more and more hours for less and less money?
To me, that is the interesting problem of the American economy, and I don’t see how this schema fits with the “attention peak” issue?
In any case, this was very interesting and elucidating to me. Thank you!