Uncategorized

Strategies Against Systems

Frames are disabled on this site.

Click here to read the article.

There is one other circumstance, peculiar to human conduct, which stands in the way of successful social prediction and planning. Public predictions of future social developments are frequently not sustained precisely because the prediction has become a new element in the concrete situation, thus tending to change the initial course of developments. This is not true of prediction in fields which do not pertain to human conduct. Thus, the prediction of the return of Halley’s comet does not in any way influence the orbit of that comet; but, to take a concrete social example, Marx’s prediction of the progressive concentration of wealth and increasing misery of the masses did influence the very process predicted. For at least one of the consequences of socialist preaching in the nineteenth century was the spread of organization of labor, which, made conscious of its unfavorable bargaining position in cases of individual contract, organized to enjoy the advantages of collective bargaining, thus slowing up, if not eliminating, the developments which Marx had predicted.

– Robert K. Merton, “The Unanticipated Consequences of Purposive Social Action”1

I want to explain myself. I don’t usually feel the need to. I can’t say I don’t try to persuade you when I write, but I dislike persuading. I dislike pretending that somehow I have thought of things you cannot. I prefer to think that by providing you with the ideas that have caused me to believe certain things, you will persuade yourselves.

Naturally, this often goes astonishingly awry.

The Deployment Age” was written and meant for an audience of marketers and corporate types: the audience at Percolate’s Transition conference. You, the people who read my blog, are a different sort. You are entrepreneurs, VCs, angel investors, startup folk. The generals, foot soldiers, and support staff of the innovation economy. I would not have given the same talk to you as I did to them. Maybe because of this many of you did not end up persuading yourselves of what I have been persuaded of.

Perez’ theory, if true, describes a system of the economy that has to be far more inexorable than many of you credit it. The five cycles described have continued relatively implacably through changes in social mores and attitudes; through changes in how we think, what we think, and how we communicate it; through changes in what we believe about our world and ourselves; through political revolutions, the beheading of kings, the invention and destruction of nations, and globe-girdling economy-encompassing wars; through famine and the end of famine, disease and the end of disease, the death of God and the rebirth of God. The cycles continue, with nothing but a wobble here and there. How could it be, through the fundamental changes in the most important and immediate aspects of our lives, that the relative sideshow of technological innovation should continue to churn on undisturbed?

Perez’ answer is that there is always fear and greed. And for the past 250 years, at least, capital has been controlled by them.

So here is the first thing I feel the need to defend. I said that if the ICT revolution is moving into a calmer, less radically innovative phase then we, the innovation economy, have an existential problem: the need for the roles we have played has disappeared. Some readers have responded by saying we must then move on to the next technological revolution. We have changed the economy for the better with ICT, let’s go do it again with the next thing, now.

No. The theory says this is what is not going to happen, it is not this technological revolution that is moving into stabler phase, it is the entire economy that is moving into a stabler phase. Capital is not now interested in radical innovation. I’ve been worrying this point in my writing for the past two and a half years, talking around it in Heat Death, Who Profits from Innovation?, The Lewis and Clark Business Plan Competition, and even in Power Laws in Venture. It’s been gnawing at me.

I’ve heard from a couple of VCs: we have the money so we can fund whatever technological revolution we want, whenever we want. What’s to stop us?

I noted the beautiful thing about technological systems in the last post: money flows to the laggard components because funding small pieces that hold back large systems yields outsized benefits. A system’s momentum propels it forward. A technological revolution is a technological system with so much mass that its momentum makes it a juggernaut, crushing every fearsome obstacle in its path. But creating this velocity with this much mass is costly. Moving a substantial system, funding each and every small component as it becomes necessary to, requires a lot of money in total, even if it isn’t a lot per component. How much did it cost to build the internet? Put yourself in the shoes of a visionary in 1970 and ask yourself how much would it cost to provide the technical means for most of the planet to digitally communicate in any available media: every backbone, every router, every server, every last-mile connection, every wifi chip in every computer, every browser, every piece of security software, every one of us for the last 40 years. Then multiply that by at least five, to account for the inevitably indirect path we have taken to get here. How much money is that? I doubt anyone really knows, but we know it’s a lot. It’s probably a significant portion of the discretionary money spent over the past few decades. This is the mass, and a VC’s $5 million investment in the next technological revolution or an entrepreneur spending ten years of their life building crucial technology can’t by itself start the next technological revolution moving, it’s not enough, not nearly enough.

We envision ourselves as that person on the horse in the movie, waving our sword and galloping into enemy lines, the army running behind us to join battle, knowing that our leadership motivates the enthusiastic and shames the reluctant. Have you ever imagined that movie if the army itself were to impassively watch the charge and then turn away and go back to their lives? What would happen to the guy on the horse? It’s not pretty. This is the situation Perez says we will find ourselves in if we try now to champion the next technological revolution before its time.

The second thing I feel the need to defend is myself. I am not a Perez ideologue. I do not hope to convince you she is correct so that she will be correct, quite the opposite.

I align myself chaotic good, as most of you probably do. I do not want to live in the 1950s as a company man in a grey flannel suit. I did that, I worked at IBM as an engineer for several years out of college. My colleagues loved the freedom from fear of a bi-weekly paycheck. I found I could not fit in2. This world, where I can benefit society by finding rules to break, was a godsend. The last thing I want is to lose it.

Aside from my own desires, I believe that technological progress is good. I want to see more technological progress in my lifetime. I would prefer continuous radical innovation, always and forever. I want interstellar travel and genetic medicine, Star Trek replicators and a Culture-like singularity. I am an unalloyed fanboy of the new, and the more the better.

I didn’t write about Perez because I want her theory to succeed. I wrote about Perez because I want her theory to fail. But this doesn’t mean I think she is wrong.

The idea that we need massive capital to have radical innovation because most of the capital is actually funding the underlying systems that we are radically innovating with, rings true to me. And the idea that capital can, en masse, walk away from radical to sustaining innovation when the risk-return preference changes, also rings true to me. But, as Robert Merton says, in the quote heading this post, predictions about human behavior can themselves change the outcome of the things they predict. Perez’ theory is not a physical theory, it is a sociological theory. It relies on the predictable behavior of large groups of people. And if this is so, then that behavior can be changed.

Obviously, the processes that drive the behavior of people controlling the capital are resilient to influence: they have stayed the same through massive changes in the socio-political realm. How, then, can we hope to redirect them? This is the question I ask myself. I don’t know the answer. But I know step one of the answer: predictions falsify themselves when they are widely known and widely feared. Convincing you that she is correct, or even that there is the possibility that she is correct is my contribution to subverting the process she describes. I don’t like being subject to systems, that’s why I do what I do, and many of you are probably the same. This is the fight for us who love innovation: how do we continue to change the world in the face of the coming complacency?


  1. Merton, Robert K., “The Unanticipated Consequences of Purposive Social Action”, American Sociological Review , Vol. 1, No. 6 (Dec., 1936), pp. 894-904. Stable URL: http://www.jstor.org/stable/2084615 

  2. I lost a promotion, as one of many examples, despite having won the “Functional Employee of the Quarter” award at 23–no mean feat at a company the size of IBM–after a prank involving uploading modified VT-100 login screen ascii art to the version control system, which preempted the official ascii art. A panicky senior manager had several of his employees in his office demanding they “fix his computer” because the login screen was upside down. He lost face with the engineers, who had, of course, seen the same login screen but immediately understood what was going on. They fixed the gaping security hole soon after, but I could never suppress the gleeful desire to subvert their rigid processes. I was a square peg. 

4 Comments

  1. Maybe the theory is correct, but the timing is wrong? After all, in 2002, you could have made the same argument. Perhaps we haven’t reached the inflection point to the deployment phase.

    1. 1) There’s an excellent chance the theory is wrong or that it is incomplete;
      2) If it’s mainly right, we may not have entered the deployment period just yet, but that means we have a big old economic crash barreling down the pike right now;
      3) But my observation (which is anecdotal, of course) is that innovation has become generally much less radical over the past eight years, as the theory predicts.

  2. I agree with your conclusion, with the reason for why you have written these posts, but disagree with how we got here and the means to avoid that which you clearly fear happening. I could not comment on your prior post, but I would just say that I am aligned with Perez’s thinking.

    That said, the modern “digital” information revolution began 170+, not 45, years ago. Western Union had the largest market cap when the phone was invented. While we knew about natural and human networks (roadways/bridges, towns, markets, transportation, etc…), we had up until the late 19th century not experienced real-time 2-way networks that compressed time and space. It was totally new science and policy. Mind you the period between 1850-1913 might have been one of the most innovative and generative in both relative and absolute senses in the history of mankind. Ball bearings, electricity, content storage, wired and wireless communications, automobiles, airplanes, etc… This might be in part because we didn’t have a lot of the institutional constraints and imbalances that we’ve had over the past 100 years with 2 world wars and the rise of the modern nation state and centralized governments with never-ending laws and regulations. But they certainly had their hands full adjusting to all that change. And in the hindsight of 2 world wars I guess they didn’t do particularly well.

    But what’s often missed is that precisely in 1913 and again in 1934 we took wrong forks in the digital communications road. If interconnection had been mandated back then and a system of market-driven intercarrier/network settlements been developed to facilitate ubiquitous service creation (the same principles apply to 2-way and broadcast networks; wired or wireless), who knows how the 20th century would have turned out. For one, more funding, sooner to develop the transistor and integrated circuit would have scaled networks more rapidly by making switching cheaper and more easily distributed. Aside from making bombs, telecommunications had the greatest need for computers in the first half of the 20th century. Almost simultaneously the distinction between wired and wireless would have disappeared. And lastly the distinction between private and public networks would developed differently.

    What does this mean today?

    For one, the way most imagine the internet happening really didn’t. It was a digital, packet-driven arbitrage of an overpriced, analog voice world brought about by vertical separation of MaBell and mandated interconnection and equal access. The last 30 years was all about playing catch-up to what the technology could do or could have done in the prior 70+ years. Arguably we’ve fallen behind trend over the past 10-15 years and only recently caught up due to Steve Jobs’ resurrection of equal access. Hence the recent unicorn bubble supported by the undeniable growth to 6bn smartphones.

    Second, the opportunity and challenges we face in the next 2-3 decades will make the last 30 years look like child’s play in comparison. The 4 big trends will be:
    –4K VoD (infinite content choice),
    –2-way HD collaboration (think virtual rooms everywhere and constant face to face interaction),
    –mobility first (whereby wireless and wired truly become one in people’s minds),
    — the internet of things (no not the siloed one you describe but the one where we digitize everything and an individual (or agent) is interacting with “n” sensors daily, where n = 100 or 1000).

    All the technology exists for these trends to be ubiquitous and low-cost today. Our only constraints are the ones that plagued us 70 and 100 years ago. Namely interconnection and market-driven settlements that promote network effect across actors as opposed to today’s “everyone for themselves (at the edge) and god against all” balkanized world due to lack of internetwork settlements in the IP stack. So you may well be right about the looming calamity, but pointing to Perez’ cycles and arguing that we have excessive valuations is missing the opportunity of joining in an effort to help academics, regulators, tradespeople and capitalists understand how implementing these two relatively simple concepts can get us on a significantly greater growth curve than we’ve experienced over the past 3 decades.

Comments are closed.