The Peer Economy

The literature of any culture is silent on assumptions so fundamental that they describe how things “have to be.” Such assumptions need not be discussed, since there is no point. Yet at the heart of such assumptions may lie an obsolescent kernel of vanishing truth, the disappearance of which will change everything.

Imagine yourself as the most informed economist around 1850. As an economic guru, you would have a confident conception about the character of wealth and its formation (rather more about the former than the latter, since wealth formed so slowly it was hardly worth studying – it stayed pretty much where it was). Without question, 1850’s wealth is based in the land and little else. Even the first stirrings of industrialism seemed to ratify the importance of land rather than discount it. The railroads, big oil and what there was of large-scale industry were based largely on real estate. Since the land had been the basis of wealth and influence forever, it would not occur to you, the world’s foremost economist, that your great grandchildren would consider land an extraneous and inconvenient factor in securing their family’s prosperity. It would be inconceivable to you that ownership of real estate could become just another business and not a very interesting or influential one.

Selling an intangible (or marginally inexpensive tangible) to someone you have never met or sold to before has become the preoccupation of our age, since it is the only way to maintain and extend your company’s market valuation. Call it the Corporate Economy.

I’m suggesting that an underlying assumption of our Corporate Economy may be just as obsolescent as was the assumption that land is the basis of all wealth. However, it might take just ten years to see changes in our economy and culture equivalent to the last century and a half, so rather than a generation to get the drift, we’ve got a few fiscal quarters.

The assumption our culture should question is that the public corporation must be the basis of most meaningful transactions.

The shift from land-based wealth to the Corporate Economy occurred because we started using the corporate vehicle in earnest. Corporations had been around a while, but did so little business that their special focus had little bearing on the economy. But to use control of the land to create Union Pacific or Standard Oil required a corporation to raise the capital you didn’t need when your use of land was to mold serfs into soldiers to build your power base.

As the corporate mechanism became the dominant business mode, all economic activity became company-centric, evolving into the unsupervised gang warfare we call the free market economy. We may no longer emphasize our membership in a particular family, church, state or, increasingly, nation, but if you don’t belong to a company, you’re next to homeless. It doesn’t have to be a big company, as long as it has a shot at becoming big or bought by one. (Stock ownership is a better form of belonging, and belonging to lots of companies’ shareholder lists is the best form of belonging, as mutual funds have discovered. Since it’s a jungle out there, you never know which gang will be standing at the end of the day).

150 years ago, you would never have predicted the wave of wealth that has swept over the globe. You couldn’t, because you’d be unable to see past the land limitation. Decoupling wealth from land was the secret to a global economy functioning in the trillions of dollars rather than a few hundred thousand, with individual households (households!) owning most corporate stock. That growth has come not just because of inflation: most people work far less for a loaf of bread than did their great grandfather. We’re making more stuff and spreading it around better. Today’s poverty is found primarily where the corporations have not superseded feudalism.

But anyone who has worked in a company wonders if this can be the ultimate wealth-producing vehicle. Working for more than one company reinforces that view. Most companies are mockeries of human potential because so few of its members are “on task” at any moment. And the tasks they are on often contribute little to the bottom line. Real productivity and profit in most companies is concentrated in the core business – the one they were founded to execute and which they have honed into a reliable formula. The profit formulas they attempt to add rarely pan out. Will this difficulty be overcome by the Information Revolution? Probably not. It usually takes a group of people coming together in a new company to generate a new productive process.

If established companies are not reliable generators of new productive processes, how is it possible that another explosion of global wealth, again amounting to several orders of magnitude, might come about?

By releasing our assumption that work must remain concentrated in public corporations.

Corporations’ inability to keep people profitably on task is the key to the demise of the Corporate Age. If you want to see people on task, stop by your local cleaners or bakery. That’s where you find people who are close to their customers, sticking to their core competencies. They are blissfully unmanaged by overly creative managers dreaming up new line extensions to fritter away shareholder equity and their customers’ time.

The question is, how could the marvelous productivity of localized business become the engine of the next wave of democratic wealth? It happens when the global communications links forged by corporations serve the sole proprietor as well as the multinational corporations and interactive TV spuds they were designed for.

A ubiquitous Internet, unmediated peer-to-peer payments and eXtensible Markup Language (XML) are the building blocks of the Peer Economy, where you transact directly with another and not their company, although you’ve never met nor will, each with absolute confidence in your security and total satisfaction. The Peer Economy provides mechanisms for wealth creation which cut across corporate borders and are aggregated in the very fabric of the Internet, not locked inside the balance sheets of contending companies and mutual funds.

So, if great granddad toiled in the old country for half an hour for the loaf of bread you earn in one minute, when will your child work 10 seconds for her bread? It happens as soon as the means of production are on task six times as much (usefully tasked, as defined by consumers, not managements). This includes people in addition to the robots and computers staffing the impending golden age of automated slavery.

The point is not how many slaves we have, it’s how much they and we are deployed on tasks which are truly useful to each other, unmediated by clueless managers.

That’s the promise of the Peer Economy: billions of productive people and millions of J.P. Morgans.

10:58:49 PM    

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