Category: Industrial Age

How the Profile of the Richest People Has Changed Over History

This interesting infographics ‘the richest people in history‘ reminds us that throughout most of our human history, the Agricultural Age, the richest people have been the kings, emperors and rulers of vast areas of land. Then, in the 15th century onwards (the start of the Industrial Age) came the time of bankers and merchants.

Detail from the Catalan Atlas, 1375 (vellum)

The infographic does not go as far, but of course from the 15th century, accelerating into the 19th century, the richest people started to be industrialists and bankers financing new machines and infrastructures. And now, they are industrialists of the economy. Still their wealth is much less than the historical rulers mentioned in the infographic whose wealth could be up to 20% of world GDP – which shows that in a certain measure richer people are now much less proportionally rich than historical figures.

The other interesting transformation to note is that up to the 15th century, wealth was derived regionally and mostly within one’s borders. Then trade spread and fortunes were made on this basis. In the 20th century it started to become truly global, and now it is definitely mostly global for the richest people on earth. Thus the geographical basis of wealth has also significantly changed.

It is often interesting to take such as historical perspective to remind ourselves that what we observe today is the result of a long evolution. Wealth is now not an exclusive property of tyrannical rulers, or industrialists but the domain of businesspeople with global interests that move resolutely into the Collaborative Age.

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How Economic Growth Definitely Reduces Poverty

The site ourworldindata.org is always an excellent reference about worldwide statistics, and their page on economic growth is particularly instructive. The historical perspective is quite instructive.

Global economic wealth production is quite exponential when looked upon a long time frame, since the Agricultural Age through the Industrial Age. Lately, it has spread to many more countries and people, sustaining this exponential growth.

GDP per capita follows the same exponential growth, particularly in developed countries, but also – albeit at a lesser level – in developing countries.

As the page shows, conversely, extreme poverty has been decreasing significantly in the recent decades globally, which is excellent news (even more taking into account the significant growth in world population) – going down from a historical 75% of world population down to less than 10%.

Hence economic growth is definitely a major component of human well-being. Solutions to the current climate crisis should take it into account, looking at means to pursue growth – in a more sustainable manner – so as to continue raising the well-being of more people.

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How Building Companies Is Still Needed Beyond Freelancer Networks

In today’s collaborative economy, there is a real question in certain service industries of the interest of building corporations instead of just relying on a network of freelancers. This post by Valeria Maltoni ‘Why Build a Company‘ sheds some light on this important question: in fact, only established companies can act in a longer timescale, and this remains a social requirement.

Corporations are of course needed when substantial capital investment is required like in the heavy or light industry of the Industrial Age; but in the services economy where capital investment is minimal, the question remains open and controversial. I know quite a number of organisations that rely mainly on animating freelancers to deliver services. On the other hand, I have build my own service companies as being mainly companies with partners and employees, and if we do use freelancers, it is only sparingly to complement rare competencies.

Valeria Maltoni makes an excellent point about timeframes. “The destiny of our species depends on our ability to survive on different time scales.” And companies have a different scale (years) compared to freelancers (days, months). Their project is to developing something over years and even sometimes generations.

She quotes “Corporations are entities that can transform and dissipate socially useful energy throughout society“. “Building a company is creating the vessel to hold value“, and this value can have many dimensions beyond the financial. In building my companies I certainly take a longer time view to deliver some kind of long standing value to the world.

Even in the Collaborative Age, the core of corporations to develop and keep value on the longer term will remain required. There may be more freelancers and people flowing from project to project, but some longer-term value receptacles must remain.

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How the Silicon Valley Origin is Actually Related to WW2 Defense Effort

I can only encourage you to take some time and read the series of blog posts by Steve Blank (an entrepreneur and Stanford professor) about the secret history of the Silicon Valley (first post of the series: ‘If I Told You I’d Have to Kill You: The Story Behind “The Secret History of Silicon Valley”‘). There is also a Youtube presentation by the same Steve Blank.

This series of posts is incredibly instructive and starts with electronic jamming devices developed during World War 2 to jam German anti-aircraft radar during bombing raids over occupied Europe. Subsequently with the Cold War, many efforts were made in programs financed by the military to continue to develop advanced electronic warfare devices. One particular challenge was to be able to get bombers in the Soviet Union for a first nuclear strike, overcoming the extensive radar and electronic defense coverage.

Beyond the extremely interesting accounts for this period, we find that most of the initial Silicon Valley innovation ecosystem was centered around Stanford and defense efforts in the electronic warfare field. Arpanet, the origin of internet, is of course another defense programme designed to sustain communications even in case of nuclear damage. Therefore the Silicon Valley is the child of a large government, defense related program. It is the consequence of another breakthrough of WW2 and, industrial-age like, is a centrally financed effort.

Therefore, if you seek to emulate the Silicon valley today (like half of the governments would dream to), that may be a bit hard, because the roots of this unique ecosystem go back a long time, to a heavily funded, continuous effort from WW2 to the Cold War over five decades.

Hat tip to Nicolas Colin as I found the reference in his excellent book ‘Hedge: A Greater Safety Net for the Entrepreneurial Age‘ – more on this book reading notes in future posts.

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How the Notion of Country Is Becoming Progressively Obsolete

As reminded in this excellent post by Gapingvoid, the notion of country is quite recent (the formalization of the concept of nation dating back to the Peace of Westphalia (1648)). It is now under siege, and actions are being taken in real life that show its limits: “The Kingdom of Denmark has just appointed a new Ambassador… not to a country, but to Silicon Valley“.

There is thus an increased recognition that large corporations of the Collaborative Age may have a larger influence on our lives than smaller countries. At the same time the notion of nationalism shows its limits in an open, more connected world (even if there is a temporary reaction against international trade, it remains and will remain a major economic factor).

There is at the same time a pull-back towards one own’s community (smaller entity than the nation-state) and the feeling of belonging to a wider, more international community through our social networks and through supra-state entities such as the European Union. Power is hoarded by large global corporations. At the same time, the emergence of a nomadic elite is substantially changing the perspective of the society influencers towards a more global perspective. The central level of nation-state is progressively being voided, or at least becomes less important.

The nation-state was probably a temporary useful concept suitable to the Industrial Age. It is probably not adapted to the Collaborative Age and new governance levels will have to be implemented – probably a multi-layered governance with a much stronger global level.

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How Various Meanings are Used for the ‘Fourth Revolution’ concept

This excellent post by Quartz ‘We’re thinking about the fourth industrial revolution all wrong‘ gives some perspective on terminology. It compares what is now generally understood as the “Fourth Industrial Revolution” (1st: steam engine; 2nd: oil & electricity; 3rd: internet; 4rd: digital) and what we name here in this blog the Fourth Revolution (1st: language; 2nd: writing; 3rd: broadcasting (printing etc); 4th: cheap 2-way communication).

Basic RGB

I like very much this article of course because it exposes that we should not be myopic and that the real change is akin to what we expose in this blog since the beginning. What is usually meant by the “Fourth Industrial Revolution” is in fact just a way to name a trend into the digital, but the real change is really very cheap, global, 2-way communication. In this article, it is mentioned as “the period of industrialized intelligence, rising with the mental-energy-saving inventions of the mid-20th century and continuing through today. Much as the industrial revolution dehumanized biological strength with machines, the displacement of biological intelligence with computers represents the dehumanization of intellectual labour. Projecting current techniques a few years forward suggests that autonomous systems will eventually be capable of outcompeting humans in every area where intelligence is the key component of production.”

To avoid falling in the trap of overestimating the importance of present trends, it is always worth taking a deep historical perspective. In any case, the current transformation is really a revolution, and probably much deeper than the concept of “Fourth Industrial Revolution” would imply: we are now beyond the Industrial Age!

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How We Need to Shift from our Environmental Scarcity Mindset

Cory Doctorow excellent Locus column ‘Cory Doctorow: The Jubilee: Fill Your Boots‘ completed by his own post introduction ‘my column on how technology could let us work like artisans and live like kings‘ hints at interesting historical facts about our current vision of world ecology.

In particular he explains how since the 1970s and the book Limits to Growth “scientists, sf writers, economists and environmental activists have wrestled with the question of abundance — how the “green left” transformed left wing politics from the promise of every peasant living like a lord to the promise of every lord living like a peasant.”

The assumption of scarcity which stems from this approach (itself closely related to the limits of our Mother Earth so visible from photos of the space missions from 1960s) coupled with the assumption that well being was necessarily related to a significant usage of natural resources led to the development of a strong culpability feeling for all of us – and the feeling that we could only expect a decrease in our comfort level.

This scarcity assumption is still the premise of many comments on environmental issues. It is an issue in some instances but overall, we seem to have increasingly decorrelated energy consumption from growth. Would it not be possible that in the Collaborative Age we manage to have abundance within the capability of Mother Earth?

The point here is that some of the 1970s assumptions that govern the way we manage environmental politics might need to be revisited in the light of recent technological developments.

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How Industrial Revolution Comparisons Are Not Comforting

In a very interesting article ‘Industrial Revolution Comparisons Aren’t Comforting‘ economist Tyler Cowen analyses the consequences of the revolution on labor and wages. In particular it shows that real wages actually went down during the period of adjustment for the average worker.

power-loomsI am fond of historical comparisons and parallels and this recommended article is a very interesting analysis. One important and interesting quote: “By the estimates of Gregory Clark, economic historian at the University of California at Davis, it took 60 to 70 years of transition, after the onset of industrialization, for English workers to see sustained real wage gains at all.” And Tyler Cowen compares the situation to the actual stagnation of wages since the late 1990s in developed countries.

One element of worry is of course that the Industrial Revolution led to the development of certain ideologies which led to revolutions and political instability and volatility – and much suffering.

Are we watching the same evolution now? This might be an issue to watch closely. I am not as optimistic as Tyler Cowen that this time we should be less extreme and more reasonable: the inclusion of developed countries in the Fourth Revolution will create substantial new sources of instability.

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How Value Shifted from Tangible to Intangible in 30 Years

One of the most visible effects of the Fourth Revolution is the shift of value from tangible to intangible. It can be measured, and it is tremendous. Organization’s value today is 80% intangible, while before 1970 it was the reverse.

shift tangible to intangibleIn the Industrial Age the value of organizations was machines, and other tangible assets. It is actually what is measured by traditional accounting in balance sheets. Nowadays, most of the value is intangible assets – people, knowledge, brands, ways of working. The shift has been measured and this revolution is quite impressive. It is a real indicator of the Fourth Revolution in action.

The fact that traditional accounting has not adapted to this shift (people are still a cost and not an asset..) is a major issue that will necessarily lead to problems of valuation very soon. Accounting maintains an illusion that can’t reflect the actual value of an organization. The market does somehow, but does not account for intangible benefits either (such as, allowing connections between people in the world).

The shift from tangible to intangible is a tremendous change and its aftershocks will still be felt for the decades to come in many areas.

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How Individualism Returns after a Short Industrial Age Parenthesis

Paul Graham in his (controversial but thought provoking) post ‘Refragmentation‘ gives an interesting overall view of how the Industrial Age may have just been a short parenthesis in the history of humankind when it comes to lesser individualism and more even spread of wealth.

How Rockefeller was wrong. Individualism only collapsed for the Industrial Age.
How Rockefeller was wrong. Individualism only collapsed for the Industrial Age.

He states: “The late 19th and early 20th centuries had been a time of consolidation, led especially by J. P. Morgan. Thousands of companies run by their founders were merged into a couple hundred giant ones run by professional managers. Economies of scale ruled the day. It seemed to people at the time that this was the final state of things. John D. Rockefeller said in 1880: “The day of combination is here to stay. Individualism has gone, never to return“. He turned out to be mistaken, but he seemed right for the next hundred years.”

With the Fourth Revolution, large companies are not any more the most effective way of creating value. Individualism is enhanced by our capability to broadcast to the world, and the contribution of everyone is enhanced.

In many ways the Industrial Age was an exception to the way the world had been moving along, and it may have been a short exception in many ways regarding individual life, employment and our social contract.

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How the Fourth Revolution Definitely Made Reductionism Obsolete

Antireductionism “advocates that not all properties of a system can be explained in terms of its constituent parts and their interactions” [Wikipedia]. It stands opposed to reductionism, the approach typical of the Industrial Age, which considered that the behavior of entire systems can be explained completely by a description of their individual constituent parts and their interactions.

In the 18th century people thought animals could be described as a mechanical apparatus
In the 18th century people thought animals could be described as a mechanical apparatus

Already the philosophers of Enlightment struggled a bit with reductionism that was contradicting our free will. Still, the mechanistic view of reality dominated science and our understanding of the world until far into the 20th century.

Today in many areas such as chaos, systems biology, evolutionary economics, and network theory, we know that complex, unpredictable behavior arises from large collections of simple components.

“By the mid-twentieth century, many scientists realized that such phenomena cannot be pigeonholed into any single discipline but require an interdisciplinary understanding based on scientific foundations that have not yet been invented. Several attempts at building those foundations include (among others) the fields of cybernetics, synergetics, systems science, and, more recently, the science of complex systems.” writes Melanie Mitchell in ‘Complexity: A Guided Tour‘.

The study of complex systems is an emerging and still very incomplete science. It is the hallmark of the Collaborative Age.

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Historical Perspective on the Development of Weak Ties

Following on our previous post on “How the Fourth Revolutions Enhances the Power of Weak Ties” I find interesting to observe the history of weak ties throughout the different periods we have identified in the Fourth Revolution book: the Hunter-Gatherer Age, the Agricultural Age and the Industrial Age.

Hostile_African_tribe
In the Hunter-Gatherer Age, Weak Ties were inexistent

As clearly exposed by Jared Diamond in his latest book “The World Until Yesterday: What Can We Learn From Traditional Societies“, in the Hunter-Gatherer Age, weak ties did not exist. You were part of the tribe or not. If you were not part of the tribe we had to fight you as a basis (before any attempt at discussion). This is still observed with tribes that had never any contact withe the outside.

In the Agricultural Age, with the advent of Writing, Empires and Cities, weak ties developed, mainly within the wider urban community. Still the extended family (the ‘blood’) and unions between families remained extremely important and essential, before considering any additional relationships.

In the Industrial Age, with the advent of printing and long distance communication of ideas, weak links became much more important. There are a number of instances where weak ties played important roles in particular in the community of scholars, who were exchanging correspondence and ideas all over Europe. It also extended to the skilled workforce and artisans. However, because of the technical limitations, long distance weak links were still difficult to maintain and communication infrequent.

Finally the Fourth Revolution and the Collaborative Age will allow us to fully leverage our weak ties to a much wider and dispersed community of people.

Ideas are breeding through chance encounters with other ideas. They breed through our weak links. With these weak links becoming easier, more global and prevalent, how can the Collaborative Age not be an Innovation Age?

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