Wealth creation options

Every society has an economic model which is woven into its cultural structures and biases. Early European societies chose their leaders like wolves do – the toughest, snarliest male ruled everyone who was less nasty, and so forth down the chain of outrage – “the divine right of thugs” (John Perry Barlow). After a while, political savvy and stability counted for as much as toughness, so confidence (and power) became vested in a single family’s line of orderly succession which was always being tested and occasionally altered, but there was a single king at any one time. After that, history has been a gradual spreading of the wealth to more and more participants.

Today there are forms of prosperity which do not depend on one’s place on the Forbes 400 list of jillionaires: most North Americans and Europeans enjoy a standard of living beyond any medieval king’s.

Feudalism’s rule of force

Perhaps the most hierarchical model: In this system, everything and everyone in the kingdom belongs to the king, who shares his rights with nobles on a conditional basis, dividing up the economic production (i.e., game and agriculture) based on what frontiers they protect. As long as they remain loyal, Lord John gets most of the production from one county, called a “shire,” and Lord Alfred from another shire. (The old word for cop was “reeve,” so the lord’s henchman was his “shire-reeve” or sheriff.)

The king and his nobles are woven into a web of wealth but there’s almost no chance for upward mobility for others and very little portable wealth. The system works because each productive person – the serf – is woven into a web of support and is reasonably safe from foreign soldiers. The serf’s only wealth opportunity is as simple as the possibility that his son might join the crusades and be fed and clothed better than dad and end up with a little bit of ill-got plunder.

Aristocracy – the rule of position

Of course, the nobles have children, so the goodies get divided up into smaller and smaller parts, but everything still belongs to the nobility – the only ones woven into a web of wealth. Like the feudal system, technology moves imperceptibly in an aristocratic economy, so there isn’t much of a chance for someone to break into the higher brackets by inventing a steam engine or motorcar. Upward mobility is limited to sucking up to someone higher up the pecking order, so most of the aristocrats hang around the king’s court acting as fashionable as possible. In the case of Europe, the wealth stayed pretty much where it was, although subdividing a little each generation. The common people still had their web of support and could look to warfare for a faint wealth opportunity.

Mercantilism & Colonialism – the rise of mobility

Nobles need fine garments and exotic foods, spices and trinkets to impress each other, so a merchant class rises which becomes the engine for change and possibility for the lower classes. Adventurous souls who colonize and administer foreign lands can win a ticket into the aristocracy by opening new possibilities for power and ostentation for the aristocrats, who retained their exclusive web of wealth. This kind of thing is too rough for the gentlefolk, so there’s a lot of upward mobility compared to feudalism and aristocracy – for those few who are mobile and audacious enough to conquer the seas.

Most of this population led the harsh and hopeless life of their ancestors, but for the first time there was a chance at a slightly less military prosperity by gaining a foothold in the colonies and cultivating new lands – an unintentional shifting of emphasis from conquest to productivity. Naturally, this all depended on the unconscionable, systematic eradication of the rich cultures encountered by the relatively uncultured soldiers and serfs. But, from the viewpoint of those emigrating from the European underclass, colonialism/mercantilism was an unprecedented opportunity.

The possibility of going to a new land was a wealth opportunity which may have been statistically insignificant but was tangible enough to maintain hope, at least for kids or grandkids.

Industrialism – the rise of productivity

For the first time, the extractive kinds of wealth (farming and mining) became less compelling than the transformative kinds of wealth (milling and manufacturing). The wildcard role of technology really started to shine once a novel machine or process could leverage the impact that a given set of resources (capital) could produce.

This is a fundamental shift from those who hold power through their position to those who hold power through their know-how: the statists vs. the producers. Naturally, those who want to rule because of some assumed right to rule did not give up their power gracefully. One could argue that the world wars were the conflicts of the statists vs. the company men. The companies won. Actual wealth started to count as much as position.

Johnny marched home to more jobs, hope and the promise of more upward mobility than ever before. But real wealth? That was hardly a consideration for any but the old aristocrats and the corporate chieftains who owned a piece of their own companies. They were the only ones woven into a new web of wealth – based on the accounting systems of the companies in which they owned stock – rights to a little bit of many others’ productivity. The stock market itself had not yet become a universal wealth machine nor had corporate salaries and stock options skyrocketed. The worker’s wealth opportunity was defined as a slowly increasing paycheck and increasingly accessible homes, cars and vacations. Given the historic options, that looked pretty good.

Corporate Capitalism – the rule of meritocracy

Free-market capitalism is neither aristocracy nor democracy. Its special “ocracy” is meritocracy – those who are most able rise to the top of the pecking orders of multi-national corporations and their management teams, not determined by any static biases of family, ethnicity, national origin, birthright or even gender. But the lack of those perceptible biases doesn’t mean there’s a lack of bias. The bias is for a special blend of intelligence and energy called merit. Most of the significant wealth is managed by corporations which need a steady supply of hungry young tigers with big brains and bigger egoes to attack markets and destroy competition and launch killer products to conquer market segments.

It sounds as brutal as feudalism. The expendable foot soldiers of these campaigns are people from the same social classes as those who rise to the top. The difference may be in their genes – their hearts don’t seem to be in the unending fight – and at some level they know they’re expendable as soon as a wave of re-engineering or acquisition dictates. There’s been a steady increase in the level of commitment, intelligence, energy, ambition and ruthlessness required to rise to the top of any organization, so the few who make it are reaping greater rewards compared to the people who fight in the trenches. And that’s why they’re in the game.

Money, not nobility, is the only way to differentiate oneself from the run-of-the-mill. The stock market wealth engine has reduced the process to a formula: Own stock or options in a company; build the company (perhaps from scratch); buy another company or be bought out; own stock and be perceived as instrumental in building the new organization; buy another company or be bought out… That process builds the winner’s web of wealth. Stock is never given out of generosity, so folks who don’t negotiate hard have a more constrained web of wealth. If they are downsized, they are separated from their web of wealth, perhaps before they have any significant bit of other people’s productivity.

Meritocracy is a profound, perhaps counter-genetic shift. Historically,
those who were woven into a web of wealth maintained a web of support for the many whose productivity they laid claim to. For the first time, technology means that more productivity does not mean more workers. The genetically based contract – that the powerful protect the weak in exchange for their productivity – has broken down. It would never occur to a king or noble (or silver-backed gorilla) to estrange a loyal and hard working serf simply because there were other, harder-working serfs. This all changed with the pervasive application of the Net Present Value calculation.

With no alternative in sight and general agreement that capitalism won the battle of the isms, no one seems to see any alternative but to keep carrying a heavier load each year, like the farmer carrying a calf around each day until he falls under an unsupportable load of bull.

Perhaps this is not the final system. Perhaps there’s life after meritocracy, especially when one observes that the products and services produced by the meritocrats are not always satisfactory. Just because these hard-charging companies are defeating each other in the market doesn’t mean they’re winning customers’ hearts and minds. There’s something about large organizations which squanders most of the participants’ time and energy in producing motion rather than progress. Too often, they seem as competitive with customers as they are with competitors, designing byzantine structures to lock a customer into a complex dependency when all the customer wanted to do was surf the net or call home.
12:57:20 AM    

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