Meritocracy – meritorious or

meretricious? So we see an evolution of the personality types running the show, with today’s rulers seeming to be more like James Spader than Arnold Schwarzenegger. Most of us are dancing to someone else’s tune, whether we’re resentful, accepting or in denial. Even those who seem to be masters of their destiny are usually also caught in the trap of reacting to larger forces.

The interesting question is not who runs the show, but what is the purpose of the show? What force is driving the engine of greed, fear, manipulation and capitulation that circumscribes most people’s quietly desperate lives?

The Tyranny of Net Present Value

All capitalism is based on a single strategic algorithm: calculating the Net Present Value (NPV) of a series of anticipated cash flows by discounting each future cash flow (cf) by a desired annual return % (discountRate) over the period of the expected cash flows:

Why would this dry formula be so important to a design study for a new microeconomy?

The NPV calculation lies at the center of all modern resource allocation decisions.

You may resent it, but all your economic possibilities are defined and constrained by this simple calculation buried in the computers of people you will never meet. It is what they are talking about when people say “Follow the money.”

Philosophers surely regret the idea that the greatest civilization in the history of civilization has been reduced to a single simplistic formula, but that is the case. If in the beginning was the Word, then in the end there’s only the Net Present Value formula. With it, managers and financiers and governments and pension plans compare any set of cash flows to any other set. Then they sell the lower one and purchase the higher one. Even though it ignores the sweep and drama of the rise of civilization, it’s a democratic yardstick. It’s also the basis of meritocracy.

That is the process of “capitalizing” every cash flow, whether it’s an inflow (customer payments and collections, bond yields, corporate earnings) or an outflow (employee salaries and benefits, supplier payables, social security payments). Corporate managements have an uneven track record in growing their revenues but they are masters at reducing their expenses and making optimistic forward-looking statements. A company’s stock market valuation is some multiple of forecast earnings. To increase the value of the shareholders’ (i.e., management’s) stock holdings and options, the best strategy is to reduce expenses, which appears to instantly increase earnings. As available capital exploded in the 20th century, every discernible cash flow opportunity in the economy shows up on someone’s radar screen and is targeted for assimilation or annihilation, whether it’s mom & pop retail sales in rural Arkansas (a Wal-Mart opportunity) or a 48 year-old engineer at Chevrolet (a GM expense).

The logic of meritocracy says that an electrical engineer may be a star at 27 but a liability at 48. This is the basis of the pervasive, subconscious grievance against meritocracy, even when it’s not framed in those terms. The conventional wisdom of the age is that everyone needs to re-train themselves on a moment’s notice to become a software programmer or help line staffer or home health care specialist.

The question is, what is the obligation of an economy to consider and support the preferences of the majority of its participants? Naturally, the “moving hand” school of thought is that the market economy is driving all these choices, and complaining about it is unreasonable, as G.B. Shaw pointed out. Even if individuals can adapt as quickly as proposed and remain employable, they are repeatedly separated from their last company’s web of support and their only opportunity for a web of wealth – often, it appears, by intention. Even when they earn stock worth more than a million or so dollars, they may feel as far from their dream as did some Silicon Valley millionaires before the Big Bust:

“Before there was a Silicon Valley, there was a Santa Clara Valley. This was a place like most places in America. People lived at many economic levels, but most could live comfortably, with some confidence that tomorrow would work out.
“But today, anxiety is everywhere.
“So it is rather interesting that, no matter what their financial status, the people of Silicon Valley all seem to want the same thing. They want a good life. They want their families to be safe from harm, with quality food on the table, a sound roof over their heads and a good education. And they want a secure future.
“Surely, if we can be so clever as to create all this miraculous technology and all this massive wealth, we can create a society that enables a stable and sustainable quality of life for everyone.
          – Here’s the Pot of Gold, Now Where’s the Rainbow?
            (San Jose Mercury News, 8/24/99)

The deeper problem with meritocracy in the corporate age may be that it is judged in a court of appearances no more reliable than the royal palace where the nobles fawned over the king. What appears as merit in the boardroom may not look that way to the customers, flawed as they are with their self-serving yearnings for software that’s yielding and hardware that’s durable and support that’s uplifting. What if tasks were performed in the harsh light of the global market and were rated by the customer before her tears of gratitude or rage are dry?

Super-Meritocracy

It’s possible that some successor to corporate capitalism could allocate people’s time better and reward them more generously, which has happened with every previous shift in economic operating systems. If there were such an improvement, it would have to rise alongside the current system, starting as a minor solution to some pervasive need in the larger system. It might be called the Peer Economy, where you transact directly with your peer and not their company, although you’ve never met nor will, each with absolute confidence in their security and total satisfaction.

The Peer Economy will appear if it has a means to weave webs of support and wealth which cut across corporate borders and are aggregated in the very fabric of the Internet, not locked inside the balance sheets of contending companies with inconstant loyalties to their people and variable reliability in the marketplace. It must depend upon a data structure free of control by any entity, open to all and shared among the participants to any transaction. Until the introduction of XML in 1998, that was technically unfeasible. Today, it is technically trivial.

Xpertweb is a set of mechanics to serve the Peer Economy’s open data requirement.

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