Will the Nation-State Soon be Obsolete?

I wonder if the nation-state hasn't outlived its usefulness.

City-states had largely disappeared by the time of the Enlightenment. By the time that Germany and Italy became nation-states in the late 19th century, most of the West had coagulated into nation-state form. A nation-state had more military power than a city-state and by eradicating trade barriers within the country, nation-states stimulated trade and prosperity.

Conditions of the 18th and 19th centuries seemed to make the city-state obsolete; perhaps the conditions of the 21st century will make the nation-state obsolete.

In today's world, the nation-state seems increasingly ineffectual at dealing with real problems. It isn't particularly suited to the major issues. Pandemics, terrorism, financial crisis, immigration, trade, economic prosperity and, of course, global climate change are all issues that thumb their noses at national boundaries. Already in Europe, nation-states are gradually giving more power over to the EU. I suspect that this is a trend (that will, as all such trends, suffer reversals).

It is difficult to think of what nation-states are still uniquely suited to do; they still seem to have a monopoly on starting truly horrific wars. We now have about 200 nations on this little planet. It's not obvious that we can afford for even 10 or 20 percent of them to be strutting around with nuclear-equipped armies. It might make sense to emasculate the nation-state before this creation of ours destroys us.

“If you said, ‘Let’s design a problem that human institutions can’t deal with,’ you couldn’t find one better than global warming.” - Henry Jacoby, MIT School of Management

Predicting a Massive Wave of Social Obsolescence and Innovation

If I were to tell you that within 50 years, your car, your stereo, and your computer will all be obsolete, you would likely yawn. You expect such technology to radically change. Your reaction to my next prediction might be less obvious. Within 50 years, your schools, your corporation, and your government will all be obsolete. The social technology will radically change.

I can safely predict a few things. One is that the rate of technological change will continue to accelerate. A big factor in the rate of innovation is information. Access to, and quantity of, information are both growing rapidly. The result? Accelerating levels of innovation that change technology.

The impact of technology is never benign. Life expectancy will go up, which seems wonderful. But if this happens while birth rates are dropping, the ratio of working population to retired population is likely to drop precipitously. Technology is disruptive.

Technology changes impact social institutions. The Gutenberg Press made it possible for households to afford a copy of the Bible. (During medieval times, one man sold his house to buy a Bible.) This is fascinating technology but its real impact was social – one could argue that the distribution of Bibles triggered the distribution of power and helped to fuel the Protestant Revolution. This is a clear case of technological innovation triggering social innovation. It is by no means the only such case.

Technological inventions will radically change in the next fifty years. The change of social inventions will be even more remarkable. Corporations, government, and schools will perhaps be changed the most.
Will the corporation as it is now is managed be able to keep pace with technology and market changes? Is the way that employees are now managed likely to increase productivity enough to offset the precipitous drop in the ratio of working population to retired population?

Will the nation-state as it is now governed be able to achieve important like sustaining peace and reducing green house gases? It is hard to imagine that as more countries compete economically with India and China that they’ll make more progress in reducing greenhouse gases. It is hard to imagine that as more countries gain the technology of nuclear weaponry that they will all use it as a war prophylactic rather than an actual weapon.

Do we think that our current education system - geared as it is towards realizing the potential of maybe 5% of the population - is going to survive in a world where careers are being redefined as quickly as products are today?

The rate of technological change will continue, but it will seem almost incidental to a larger work. By 2050, the world's social institutions will have been radically reconfigured and with it the very way we think about society and self. We will look back on the half century leading up to this time as a period of the most significant disruption of social systems ever seen.

We’re going to see a transformation of our very notions of institution, organization, and roles. It will seem as though the time leading up to the 21st century was an ice age, a time when social roles and institutions were basically frozen. And by 2050, what was once frozen will be in flow.

You and the Future of the Corporation

Now
You go to work inside of a corporation. The corporation's policies are formulated by senior managers. Goals are set for your department for the year. Your department head translates those goals into your goals. It may well be that you and your peers can see a number of problems with the overall plan as it applies to you, but your attempts to point that out are largely ineffectual. You have little control over the direction of the company. You can leave the company if you are unhappy with its direction, but you would have to find a company run differently or start your own, both uncertain prospects.

Meanwhile, you contribute money each year to a pension fund. By this point in your career, your retirement account is worth about $200,000. Collectively, with accounts ranging from about $1,000 to millions, you and your fellow American workers "control" $6 trillion in funds. Although you and your peers own the companies in which you invest, you aren't particularly happy with their policies. The companies' policies seem to most obviously benefit senior managers. You can take your money out of the company, but you would have to find a company run differently. The way tax laws are set up, you cannot shift your investment funds into a company you would start up.

You are pleased that your employer has created jobs in your community. This generally helps. But you also know that these jobs and your potential are not the aim of your company. If and when these jobs can be done for less in places like the Ukraine or Mumbai, they will be. It is not just your community you are concerned for: you are worried about your planet and don't really know what, if anything, your employer is doing about climate change.

What is the quip of Ackoff's? It's like a fly riding an elephant who thinks he is steering the elephant. The elephant doesn't mind and it makes the ride more interesting for the fly. The individual has choices but those choices seem to have little influence over the corporation.

Later
By the year 2020, our concept of corporation will be transformed. It will become a tool for individuals, a real departure from today when the individual is the tool for the corporation.

You go to work inside a corporation. Just as there are inside of a national economy, there are regulations, opportunities, and natural consequences. No one defines your goals. What you do is a product of some intersection of where you see opportunity for making money, what you enjoy doing and what you think would best realize your potential. Opportunities inside of the corporation arise organically. Employees - maybe 1% or maybe 50% - within the corporation act like entrepreneurs, putting forth business plans that capitalize on connections, technology, markets, or capital and know-how within the corporation (and without - the walls of the corporation are porous). Fellow employees vote in two ways - by signing on to an entrepreneurial venture that they see as promising. This takes advantage of two things - widespread expertise and natural markets. (If employees are uninterested in a particular venture, it suggests serious flaws with it - flaws that might never come to light until after the fact in the world of corporate dictatorship.)

The second way in which employees vote is through their pension funds. Employees have the opportunity to invest in ventures at the ground-floor level, helping to fund their own projects or the projects of fellow employees. Employee money could be invested in company stock or in the startups underway within the company. This, too, would be a market signal about where experts familiar with the market, technology, and people involved thought it best to direct resources.

The community would benefit as well. Policies organically emerge from the actions of dozens, hundreds, or thousands of employees. They are no longer top-down directed. People making policy rarely choose to put the smoke stacks upwind from their houses and the more that policies arise from the actions of more individuals, the less likely corporations are to pursue policies that degrade the environment of people "over there." The dispersion of power within the corporation will make "over there" effectively disappear. Such employees are unlikely to adopt policies that shift their jobs overseas. They will be at least as interested in opportunities that allow them to realize their own potential as they are in opportunities that maximize .... what is it, exactly, that current corporate policies maximize?

Dispersing power within the organization is not just idealistic. It acknowledges current reality. And the current reality is that expertise, information, and control of capital is already dispersed. Changing how corporations are managed to align with this new reality only makes sense.

Finally, the dispersion of power within the corporation will help us to overcome the new limit to development. No longer does land, capital, or even knowledge work limit progress. We are, today, limited by entrepreneurship. Just as the last century popularized knowledge work, so will entrepreneurship be popuarlized in this century. That is the topic for another posting.

Time to Upgrade Civilization's Operating System

Microsoft has just introduced Vista – its new operating system. Change an operating system and you change the context – change an application and you only change the problem before you. An application can be wonderful but if it is not compatible with the operating system, it is ineffective.

Right now civilization faces the problem of climate change and all the attempts to begin addressing this problem seem to be as ineffectual as trying to load an application into the wrong operating system. Indeed, our current philosophical context – civilization’s operating system if you will – is incompatible with this problem.

We simply won’t be able to address the problem of climate change (or any of a number of other problems) without first changing our operating system. Civilization’s current operating system is pragmatism. Until we realize that pragmatism is no longer pragmatic, we’re likely to find ourselves stymied by this problem of climate change.

Pragmatism has become the dominant philosophy during the last century. The pragmatist is less interested in universal truths than in solving a specific problem in a specific context. For the Enlightenment philosopher, the holy grail of thought might best be represented in the laws of physics as articulated by Newton – the laws of gravity or “For every action there is an equal and opposite reaction.” For the pragmatist, the holy grail of thought might be articulating the legal argument that wins her case before the Supreme Court or writing computer code that becomes a best selling application. The pragmatist lives in a shifting world and doesn’t really expect to trip upon any universal or eternal truths. The pragmatist, in the words of William James, is literally interested in the “cash value” of idea. Pragmatism has become the dominant philosophy in circles where it matters – scientists, knowledge workers, and policy-makers (whether in government or business) are all pragmatists.

There is, of course, at least one problem with this: in a world full of pragmatists all focused on specific solutions to specific problems in a specific context, the system as a whole is neglected. Some intelligent experts are hard at work trying to understand how to sell cars, some on how to sell political candidates, others on how to understand climate warming, but none are at work trying understand how the interaction of all these (and other) pieces come to together to inexorably move us towards a calamitous collision of culture and climate. Working towards such a solution is terribly un-pragmatic, suggesting a course of action that is both improbable and implausible. Intelligent experts are unlikely to pursue the solution to such a problem set.

What is needed are groups of people who think through what it means to transform the foundational philosophy of our modern world. What would our corporations, government agencies, and schools look like if civilization’s operating system were systems thinking rather than pragmatism?

This is not merely a rhetorical question. Just such a transformation is exactly what happened about two to three hundred years ago when our notion of government was transformed. Our founding fathers were deeply influenced by Enlightenment philosophy. The historian Walther Kirchner went so far as to write: “The first great assault upon the traditional social system occurred in England’s thirteen colonies. They were comparatively free and prosperous and subject to rather generous, progressive government. The assault was not led by the oppressed, but by those who had little to gain except the fulfillment of certain ideals rooted in the spirit of the Enlightenment.”

How do we address problems that spill across boundaries and seem to thumb their nose at our current institutions? I’d argue that the solution to how we transform society begins as it always has – with a transformation in our philosophical operating system. The Renaissance, The Enlightenment, and Pragmatism all represented upgrades to civilization’s operating system – a transformation to the philosophy and paradigm of society. It’s time to upgrade again. Before the system crashes.

4 Revolutions and the Rise of the Individual Over the Institution

A pattern of revolutions has brought us out of the Dark Ages and into the modern world. This pattern has been repeated three times. During your lifetime, it will repeat for a fourth time. This will be the next great revolution.

If I were to ask you to name some technological inventions that helped us to become modern, you could probably name quite a few – things like the printing press, the steam engine, the automobile and the computer. But if I were to ask you what social inventions helped us to become modern, you might pause. We are less inclined to think of things like schools and universities, banks and corporations as inventions and yet they are. Our social institutions and customs are at least as different from what they had in medieval times as is our technology.

When a technology inventor comes up with a radically new product, they call it an innovation. When a social inventor like Martin Luther or Thomas Jefferson comes up with a radically new institution, they call it revolution. Such revolutions have created our modern world. A fourth is about to transform it once again.

The First Revolution - the Church
In 1300, you could be burned at the stake for a number of offenses. If your neighbor's donkey had died or crop had failed, he might bring an accusation against you for being a witch. If you spoke out against the church, questioning its doctrine. Or if you simply owned a copy of the Bible in your own language. All of these, and more, were capital offenses.

In the early 1500s, Martin Luther became the most visible agitator for a change to the church. He didn’t like the idea of church authorities substituting for his conscience or interpretation of the Bible. He may have articulated the first revolution when he said, “We are all priests.”

It took quite some time, and a tragic amount of bloodshed, but the individual in the West finally gained the freedom to choose how – or even whether – to worship. The power that once was held by the church – by the elites within the church – was now held by the individual. This church revolution was the first great transformation of the West. To appreciate how different this made us, consider the fact that in many Muslim countries today it is a capital offense to renounce one’s Muslim faith. Think about how different life is here in the West for this reason alone.

The Second Revolution - the State
The second great transformation involved the revolution of the state. We learn about this great and amazing story in our American history classes. Jefferson penned the words, “All men are created equal.” Again, the revolution was not immediate. After we won our independence from the British, for example, only white, landowning men could vote. But the idea of power to define policy – to define the laws and budgets that so influence our quality of life – the idea that this should be power ultimately held by the people is an idea that has spread. In just the last century, the number of democracies has increased from about 13 to 67.

It is not, ultimately, the aristocrats who decide on the politicians and policy that defines our society. Rather, it is the polity. As with the Protestant Revolution, Democratic Revolution dispersed power outwards from elites to the common person.

The Third Revolution - the Bank
The third great transformation involved a revolution of the bank – a transformation of capitalism.

Before this, the third transformation, it was common for a 9 year-old child to work 12 hour days in factories and for young women to not only work 12 hour days but to be, effectively, prisoners on a factory compound, able to leave only on Sunday’s. The power over lives that had earlier been held by popes and kings was now wielded by robber barons. Money and credit was scarce – to get a loan you would be subject to great scrutiny and bankers would decide whether or not the purchase you wanted was appropriate.

By 2000, capitalism had transformed in so many ways. As with the church and state before it, the power of the bank had been dispersed outwards to common people. The great management guru Peter Drucker was one of the few to note that by the end of the 20th century it was labor - people like us – who through their 401(k) plans and pension plans now owned the majority of the country’s equity.

The battle between capital and labor that played out through the actions of robber barons, unions, and in more dramatic relief through the policies of communists and fascists, was over. The battle had not been won. It had been dissolved. Labor had become the capitalist. Not only did workers have rights, but the average person with a credit card could now decide for himself whether or not to take a loan. Bankers did not decide whether you should buy the new refrigerator. You made that decision. Freedom of religion and the right to vote were followed by access to credit upon our choosing – not the banks. What would the banker of 1900 think about our literally tearing up requests for us to TAKE OUT loans? What would he think about us throwing away advertisements that guaranteed us credit?

Three revolutions have brought us into the modern world. But the church, state, and bank are no longer the dominant institution. In today's world, it is the corporation that has that role. My prediction is that the elites within corporations are going to find their power dispersed out, just as happened to the elites in the church, state, and bank before them. The CEO now making hundreds of times what the average worker makes is following in the footsteps of the Renaissance popes, the Enlightenment-era monarchs, and the powerful capitalist whose world was depicted in Dickens’s novels.

You live in a remarkable time. For one thing, all three past revolutions played out over a century or more. This next revolution will take place within decades. I will go into more detail in later posts, but the fourth revolution has already begun. For now, I will simply say that the Internet has dispersed information outwards to average employees. Increasingly, power, decision-making, and autonomy will be dispersed with it.

We know that a country is poorly developed if its head ruler makes more money than anyone else within the country. When the top salary goes to the top political leader, we rightly suspect a dictatorship or political abuse. it is different in developed nations. Within the U.S., for instance, President Bush’s’ $400,000 annual salary might put him among the top 1 million for income. People in the United States are free to make as much as they can, and many make more than our political leader. By contrast, it is the rare company where any employee makes more than the CEO. Imagine how incensed CEOs would be if the government was to define their annual goals and their maximum salaries – and yet that is just what these CEOs typically do to their employees.

This will change. Power will be dispersed outwards to employees from the corporate elites. Senior management will increasingly play a role that looks more like that of a venture capitalist, and employees will take on a role more like that of entrepreneurs, effectively using the corporation as an incubator for starting new ventures that translate into shared equity. As with the past revolutions, this transformation of the dominant institution will involve sweeping changes and myriad smaller social inventions. And like the past revolutions, it will be defined by the rise of the individual over the institution - an increase in individual autonomy that has repeatedly defined the West.

Martin Luther said, “We are all priests.” Perhaps the cry of this century will be, “We are all entrepreneurs.”