Social Invention & The Fourth Economy

1. Social Invention & Progress

In the earliest grades, children learn that technological inventions fuel progress. Things like the wheel, the iron plow, the automobile, and computer obviously made ours a different world.

Less obviously, social inventions are essential to progress. Tribes, city-states, nation-states, and international organizations have made it possible for larger groups of increasingly specialized people to cooperate to create a new world. Like microwave ovens, churches, governments, banks, and corporations have also made ours a different world from the one in which our ancestors lived.

We're about to enter a new economy, one in which the act of social invention (a broader application of the notion of entrepreneurship) will become as normal as the introduction of new products. At first, this will seem disorientating, but our grandkids will think it is normal. It will be a period of unprecedented prosperity and individual freedom.

2. Waves of Social Invention

Social invention often looks like revolution. When innovators change how people worship, or challenge the king’s authority, innovation will probably be violent. Indeed, the acceptance of change without violent resistance is a fairly novel experience in humanity’s history, and a big reason that the pace of progress is accelerating.

Social invention can occur in a wide variety of domains, from Macarena dance moves to currency arbitrage. Some of this innovation is random and in some of it one can discern a pattern.

Between about 1300 to 1700, a wave of social and technological inventions produced the first economy. As land, or natural resources, was the basis of wealth in this economy, one can simply refer to this as an agricultural economy. Technological inventions like the seed drill and steel plow enabled farmers to produce more and new technology like the compass made it possible for anyone to sell their products more widely, capturing a higher price as trade emerged across even oceans. Meanwhile, social inventions like Martin Luther’s challenge to the papacy and Henry VIII’s making himself the head of the Church of England were key to the eclipse of the nation-state over the church. This maelstrom of innovation produced an agricultural economy, the first market economy in lieu of a traditional economy.

Once natural resources were being traded widely (think of Italy without the tomato, Ireland without the potato, and England without tea and you begin to get a sense of how transformed Europe was by the flow of new products across oceans), the next step in creating value was processing. Wood and wool has less value than lumber and textiles. Processing natural resources into finished products was the work of the industrial revolution. This, too, required a panoply of technological and social inventions. Democracy did for the nation-state what the Reformation did for the church – dispersing power in the dominant institution outwards to a wider group.

In the last century, the most advanced countries have hosted the latest wave of technological and social inventions, culminating in the information economy. Technology like the computer and telephone, coupled with innovations like the modern corporation and university have produced the most advanced economy yet.

3. Social Evolution is Not Done Yet

But this most recent economy will not be the last. The pattern of invention and revolution since about 1300 suggests that we are on the cusp of one more wave of innovation. One more economy, one more society, has yet to emerge. As with every new economy before it, this one will transform our philosophy, our dominant institution, the social order, and the individual. And unlike the emergence of the first economy that took place over a period of hundreds of years, this one will emerge in about half a century.



4. Pattern of Revolutions

The pattern of revolutions has been the same each time a new economy has emerged. The power in the most dominant institution is dispersed outwards from elites. Intellectual, institutional, and social revolutions accompany the new economy.

In the first economy, the power of the elites over the church – the power of popes and cardinals – was dispersed. Martin Luther declared, “We are all priests!” and became a prophet of how the West would eventually treat religion – giving the individual authority to make his or her own choices about how – or whether – to worship.

In the second economy, the power of the elites over the nation-state – the power of kings and queens – was dispersed. Thomas Jefferson wrote, “All men were created equal,” and became a prophet of how democracies would eventually treat politics – giving the individual authority to choose leaders and policy that defined the community.

In the third economy, the power of the elites over the bank – the power of capitalists – was dispersed. The bank itself was dispersed into a number of pieces, some as well known as Central Banks and others as arcane as hedge funds. The average person who, in the beginning of the 20th century had to grovel for a few hundred dollars with which to buy a simple appliance would, by the end of the 20th century, be regularly turning away offers of credit in the form of credit card solicitations.

These changes were not lightly made. Although the most recent looked more like innovation than revolution, each involved myriad changes in technology and social norms. It is easy to forget that credit – or, rather, debt – was generally considered dishonorable a century ago, rather than a simple fact of life.

5. Intellectual Revolution

The most pervasive and least visible change was in how people thought. There is a huge difference between the medieval mind and even the Renaissance, much less the modern, mind. In medieval times, witches and evil spirits were blamed for bad crops, infertility, and dying oxen. The earth was the center of the universe. But Renaissance thinkers embraced facts, heeding the advice of Roger Bacon to use the empirical method.

While a Renaissance thinker like Galileo could say that the earth circled around the sun, he could not explain why it was that we weren’t spun off into space by centrifugal force, like ants spun off of a rock spun around on a string. Galileo could accept facts as he observed them, but didn’t really have a cogent explanation of why the solar system worked as it did.

It took an Enlightenment thinker – the Enlightenment thinker – to explain why. Isaac Newton, in one fell swoop, explained how it is that the earth circled the sun and why we didn’t fly into space while spinning at 1,000 miles an hour. Newton added laws – a theory – to observations and facts. His friend John Locke did a similar thing in the domain of politics, brushing aside Henry VIII’s argument for the divine rights of kings and replacing it with the rule of law to which even monarchs were subject.

Pragmatists like Henry James and Oliver Wendell Holmes were less impressed with the general application of Enlightenment thinkers’ laws. They were not looking for a universal tool with which to eat. Rather, they were content that a fork would work best for some foods and a spoon for others. They were interested in solving specific problems in specific situations and thought of Enlightenment style thinkers as idealistic. (To this day, you’ll note how politicians and managers invariably refer to themselves as pragmatic.) The engineer and modern professional is neither a Renaissance nor Enlightenment thinker. By the end of the 20th century, the dominant way of thinking was pragmatism, a philosophy at one and the same time invisible and obvious, as characterizes any period’s dominant philosophy.


6. Social Revolution

Finally, the social order is transformed with the emergence of each new economy. The medieval church was the dominant institution of that time, but as a social invention, the church is less effective than the nation-state as a means to get the most out of land – the basis of wealth in the first, agricultural economy. The nation-state’s dominance was lost when land was eclipsed by capital as the basis for wealth. The bank, or capitalism more broadly, eclipsed the nation-state as the most dominant institution during the second, industrial economy. Most recently, the multinational corporation has eclipsed the bank in importance as knowledge workers, rather than capital, have become the limit to progress. A community dominated by a church is very different from one dominated by a corporation. This revolution in the social order has seemed to get less notice than institutional revolutions that transformed the church or state, but have been as defining of the new communities.

7. Economic Revolution

These various revolutions – intellectual, institutional, and social – swirl within a larger pattern – the emergence of a new world. One easy way to tie together these changes is to see them as means for creating a new economy. Authoritarian communities like the medieval theocracy that defined the West are incompatible with market economies that take their lead from individual choices. Products of the land – whether they be spices or gold – are going to be worth more when traded and their value is greater when strong governments can remove tariffs and other barriers to trade while respecting property rights in a way that encourages investment. The emergence of the nation-state, the rise of fact-based thinking, and the reformation almost seem obvious when you think that social inventors had to develop solutions that would enhance the value of land – the basis of wealth in the first economy.

The revolutions of the second and third economies can be understood in the same way. The rise of parliaments that voted for bonds that paid interest rather than taxes that simply took money helped to fuel the development of nascent financial markets. Monarchs could not be the ultimate source of power if a community was going to encourage investment and the development of capital. Investors instead needed a rule of law in which they could trust.



8. The Fourth Economy – the Pattern Repeats
"The only thing new in the world is the history you don't know."
– Harry S Truman

As it turns out, our future is in this past. Tomorrow the sun will rise just like it did yesterday. Patterns repeat. And in this case, the patterns of transformation will repeat. A new economy, a new society, is just beginning to emerge. We can predict quite a bit of it based these past changes.

Power within the dominant institution will be diffused. Just as popes and monarchs and JP Morgan lost their grip on their period’s most powerful institution, so will today’s CEOs lose theirs. Within the last decade, information has been radically dispersed outwards; a 12 year old with internet connection has access to more information than the heads of the CIA or KGB did in 1970. Now, as decisions are dispersed along with this information – as power to act is dispersed out to individuals within corporations, the CEO’s power will change.

This is not to say that CEOs will have less power – just less power relative to everyone else. President Bush had more power than President Hussein, it is just that Hussein had more power relative to the average citizen. The role of CEO will be more like that of venture capitalist than traditional boss and while measured in absolute terms the CEO’s power will increase, in relative terms it will be radically less.

The Popularization of Entrepreneurship
In the last economy, progress followed from getting more – and getting more from – knowledge workers. Universities, information technology, and corporate bureaucracies were all social inventions that facilitated the growth of the information economy in which knowledge workers – labor – had become the limit to progress rather than capital. Before 1900, there were knowledge workers but there just weren’t enough of them to define the economy.

In this Fourth Economy, the same will be true of entrepreneurship. Since the dawning of the market economies that have defined the West during the last 700 years, entrepreneurs have been around and have been vital. But they’ve always been the exception, not the norm. An entrepreneur creates something new, defies convention to create a new organization that combines labor, capital, and resources into value. The entrepreneur is a social inventor. And the Fourth Economy will be to the popularization of entrepreneurship what the popularization of knowledge workers or capital was to the information and industrial economies. This will drive and be driven by the transformation of the corporation. Within the corporation, the role of employee will begin to look more like that of entrepreneur.

And the reason that the fourth economy will be the last economy to emerge is that within it, communities will learn to make fluid what has previously been cataclysmic. Social invention and its resultant changes will become the norm rather than an exception, part of the normal pattern of progress rather than revolutionary. Forms of schools, government agencies, businesses and non-profits as yet unimagined will result from this Cambrian-like explosion of social innovation.

Evidence of this is already appearing. A growing number of successful entrepreneurs have taken the path of Bill Gates – applying their wealth and their expertise to creating sustainable solutions, engaging in acts of social invention rather than just donating money to problems. The resultant organizations don’t neatly fit into the category of any pre-existing organizations. They are non-governmental, not really charity in the classic sense, and are certainly not for-profit businesses. They defy simple categorization and in this sense may well be the model for future organizations, pioneers of entrepreneurship writ large.

The Intellectual Revolution
Systems thinking pioneer Russell Ackoff has pointed out that we have, in the West, created separate institutions for different dimensions of being human. We’ve created schools for learning, office spaces for working, and parks for playing. And yet, this fragmentation of the human experience doesn’t really facilitate the experience of being human. Children learn most rapidly when they are working at play, innovations in work often come from learning that follows from playing with ideas or things. These institutions we’ve created fragment our experience into artificial categories and make it hard for us to treat one another as humans or to feel fully human ourselves.

Seeing beyond the confines of our institutions into what new institutions we can create will require that we adopt something other than the reductionist perspective that underlies the philosophies of the first three economies. Since the time that Descartes advocated breaking apart – or reducing – problems into simpler parts, the West has largely been defined by a reductionist approach. Systems thinking offers a complement to this, a philosophy or world view that is beyond that of Renaissance, Enlightenment, or pragmatism.

Entrepreneurship gets its value from synthesis – bringing together the pieces into some whole. Labor gets its wage, capital its return, and resources its price. After all that is paid and combined into a new whole – some product or service – the entrepreneur gets profit. Entrepreneurs are systems thinkers who deal with systems.

The really important problems are emergent – they don’t neatly fit within the confines of one institution or domain. Solutions to problems like terrorism, pollution, climate change, and trade issues are provoking the creation of new institutions, acts of entrepreneurship that bring social invention outside of the traditional confines of nation-states or corporations. These emergent problems are systems problems and can’t be addressed from within the confines of traditional institutions.

Systems thinking – with its emphasis on interaction, interdependencies, and emergent phenomenon – will be to the fourth economy what the Enlightenment was to the second. By beginning to embrace the approaches and perspectives advocated by people like W. Edwards Deming, Russell Ackoff, and Peter Senge, we’ll begin to create this new economy, this new world. It is a way of thinking that will find its expression in new institutions – in acts of entrepreneurship.


9. The Rise of the Individual

During the first economy, the nation-state rose to eclipse the church as the community’s most powerful institution. In the fourth economy, the individual will at last arise to eclipse institutions.

To date, the individual has been measured against a variety of standards, expected to find his or her justification within the institution. The individual is expected to adhere to some standard in the church, judged as good Christian. The individual is expected to adhere to some standard in the country, judged as a good citizen. The individual is expected to adhere to some standard in the corporation, judged as a good employee. In an age when social invention becomes expected, these institutions will instead be judged against the needs of the individual. Does the church make the person feel more peace, more joy, more charitable? If not, perhaps it is the church and not the Christian that needs changing – a change that requires an act of entrepreneurship, or social invention. Does the state make the individual safer and more free? If not, perhaps it is the state that needs changing and not the citizen. Does the corporation allow the individual to choose only to do tasks that add value, to pursue her own potential, and to find and create opportunities that would not exist on her own? If not, perhaps it is the corporation that needs to change rather than the employee.

Social invention has been largely overlooked in the story of progress. It will, however, be central to the fourth economy, when entrepreneurship will be popularized and institutions will be expected to adapt to the reality of the individual’s experience. This will be the most exciting economy – the most exciting world – yet to emerge.

The DNA of Social Evolution

DNA is coded by the sequence of four bases. I'd argue for a parallel in social development. At a high level, any society is defined by social order, its dominant institution, economy, and worldview. I'd argue further that a change in one of these has the potential to trigger changes in all, just as the purchase of a new software application might trigger the purchase of a new operating system which might trigger the purchase of a new computer system.



Social Order
The simplest indication of how a society is defined might be seen in its tallest buildings. In medieval Europe, the tallest buildings were cathedrals and churches. Later, castles, parliamentary buildings, banks, and corporate headquarters followed.

Since about 1300, there has been a succession of dominant institutions: church, state, bank, and corporation. In various times and places, the dominant institution is not necessarily the one that has the most physical power but, rather, the one that most structures and shapes the attention and goals of the average person. In 1100 AD, most people conformed their daily lives to the church. Today, it is no longer church bells but, rather, corporate advertising and employment to which most conform their lives.

Dominant Institution
A society dominated by the church is very different from one dominated by the corporation. But how power is distributed within the church or corporation also makes a difference. Quite simply, there are two extremes in the distribution of power within any institution: power held by elites or power distributed to the masses. It is one thing to live in a society dominated by the state, by politics; it is quite another to live in a dictatorship or democracy.

Economy
Agricultural, industrial, information, or entrepreneurial economies are very different, but all are market economies. An entrepreneurial economy is just now beginning to emerge. This emergence will have a sweeping influence, just as did the emergence of the information economy in about 1900 and the industrial economy in about 1700.

Worldview
This is perhaps the most subtle yet most defining of the four elements. How we make sense of the world defines so much else. And a worldview, like glasses, is made to be seen through rather than seen.

Since about 1300, the worldviews that have defined the West are the Renaissance, Enlightenment, and Pragmatism. Systems thinking is the set of glasses being adopted by more and more people.

Revolution
We rightfully call the change from agricultural to industrial economies an economic revolution. Intellectual, social, and institutional revolutions characterize the change of each of these elements. Western Civilization has thus far been defined by a pattern of revolutions, described in the table above.

Moving into the Entrepreneurial Economy

The defining figure in an agricultural economy is the farmer with a hoe. The defining figure in an industrial economy is the factory worker helping to manufacture back hoes. The defining figure in an information economy is the engineer who works on design plans for the back hoe.
The work of the factory work can substitute for quite a few farmers. (You can see in the above graph that farm workers were about 80-some% of the working population in 1800 and about ~3% of the working population in 1980.)

The knowledge worker, too, can replace a number of factory workers. (Think about how a newly designed robot - the product of a knowledge worker - can replace numerous factory workers.)

My own vision of a movement into an entrepreneurial economy is that the portion of the work force categorized as entrepreneur will grow as did the factory worker in the 1800s and the information (or knowledge) worker in the 1900s.

Manufacturing in the 1500s involved little alteration to raw materials: wheat was ground, wool was spun, and grapes crushed and aged. Yet by the 1800s the processing was more sophisticated. Manufacturing assumes a mature market for raw goods - and the manufacturer uses raw goods as inputs to a process that creates more value than the mere trade of raw goods.

The information economy arose out of the complexity of the industrial economy. As machinery, products, processes, markets, and distribution became more complex, it created a demand for more sophisticated workers. Education that shared knowledge about principles in design, engineering, advertising, and sales became important in the creation of a skilled work force - the best jobs increasingly required university education. The information economy assumes a mature market for capital - and the knowledge workers use capital goods as the material to be manipulated into greater value just as the capitalists uses raw materials to be manipulated into greater value.

We now have a very mature information economy. This forms a great foundation for an entrepreneurial economy that could build on information technology. If entrepreneurship is about bringing together raw materials, capital, and labor (or, more specifically, knowledge workers), then it assumes information networks that make dynamic markets cost-effective. The information economy will be the foundation for the coming entrepreneurial economy.

One difference that will characterize the entrepreneurial economy is the role of the worker. Traditionally, a knowledge worker sold his / her skills to the corporation that transformed those efforts into value on the market in the form of goods or services. Entrepreneurs or managers were responsible for correctly orchestrating such efforts into projects and tasks that created market value; if they did well, these entrepreneurs and managers were handsomely rewarded. The entrepreneurial economy will change that arrangement. An increasing percentage of knowledge workers (a percentage that I suspect will not exceed 30 or 40% by 2050) will work as entrepreneurs themselves. By that I partly mean that they will offer their services through a dynamic market rather than a traditional salaried position. Their pay will be linked to profits from particular projects or activities. We'll have the corporate equivalent of self-organizing complexity rather than central, command and control economies.

This will drive further advances in information technology, just as the industrial revolution transformed agricultural and the information economy has transformed industry. And this change will simply be the start of a more complex change that will transform the modern corporation into something that looks more like an incubator than a bureaucracy.

This will change so many things about how we conceive of corporations today. This and related, required changes will disperse power outwards from paternalistic managers towards individual workers. It will create opportunities that don't exist today. And it will link to the driving force of progress throughout the history of Western Civilization - increased autonomy for the individual.

The Swinging Pendulum of Social Evolution

The Rothschild brothers didn’t seem like elites when they began their career. Mayer Rothschild began his life living in a Frankfurt ghetto, forced to leave the sidewalk when even a young child ordered him to “Step aside, Jew!” He had the vision to send four of his five sons to the most important cities in Europe.

Mayer's son Nathan Rothschild was in London when the English began their war against Napoleon. This war was incredibly expensive. Coordinating efforts with his brothers, Nathan was able to raise huge sums of money for the British by selling war bonds throughout Europe – primarily through his brothers in Frankfurt, Paris, Vienna, and Naples. Nathan not only raised money for the British – he made the Rothschild brothers rich and famous. By the time of his death in 1836, he might have had more liquid wealth than anyone in the world. Because they helped to invent modern financial markets, the Rothschild brothers rose from the German ghetto to become elites with power enough to dictate terms to kings.

The Rothschild brothers and others like JP Morgan helped to pioneer modern financial markets and then, in the next century, philosophers like Keynes, policy-makers like FDR, and business visionaries like Charlie Merrill and Dee Hock “democratized” financial markets, creating access to credit and investment markets for the people. Alan Greenspan or Ben Bernanke is supposed to manage interest rates and reserve rates so as to do what is best for the general economy and the average person – not just a few powerful bankers. Access to financial markets is now considered a right.

Martin Luther, John Calvin, Huldrych Zwingli, and John Knox were among the revolutionaries who wrested control of the church away from the elites and helped to put it into the hands of the people.

Later, Louis XIV and Henry VIII help to pioneer the nation-state and then, centuries later, revolutionaries like Jefferson and Franklin wrested control away from the elites and into the hands of the people.

The swings between power held by the elites and the people seem to me inevitable. The elites pioneer and prosper. They are the social inventors who create the great institutions like church, state, and corporation. But once those inventions have become an integral part of the social fabric, along come revolutionaries who turn control of these inventions over from the elites to the people.

Next up for Western Civilization? Wresting control away from the CEOs, the last of the monarchs, and putting power into the hands of the investors, employees, and communities whose fate is so inexorably tied up in the actions of the corporation.

Am I a populist or an elitist? A Republican who wants the people’s interest represented by a trusted group of elites or a Democrat who wants the people to directly represent their own interests? At this point in history, I’m a populist, a Democrat ready to see the power of the powerful corporation dispersed.

A Clear Definition of Progress

Progress is a muddled concept. The current concept of progress suggests that if a community increases its GDP by 5% while eroding its habitat, it's making progress. The current concept suggests that if people feel compelled to stay indoors at night and spend more money on home security systems and Chinese take-out because of high crime rate, thereby driving an increase in GDP, it's progress.

I'd like to suggest a measure of progress that is conceptually more clear than growth in GDP, even if is harder to measure.

Progress means more autonomy for the individual. A person with shoes has more options about where to go than a person in bare feet. A person with a car has more options than a person with shoes. And a person with access to a great transportation system that costs hundreds per year has more options than a person stuck in traffic paying thousands per year for gas, payments, and insurance. A person with the option to enjoy a local forest on the weekend or even on a lunch hour (I used to love jogging the fire trails through the redwood trees between classes at UC Santa Cruz) has more autonomy than a person who lives in a concrete jungle miles and miles from any bit of wilderness. Progress = more options for the individual.

When the West wrested freedom of religion away from the medieval church, the individual had more autonomy - more choice about how and whether to worship. This was progress.

When the West wrested political control away from monarchs, the individual had more autonomy - more influence over the policies that defined the community.

When access to credit and investment markets was popularized, when the average person had access to retirement accounts through a combination of retail innovations and social security, the individual had more autonomy - more control over the financial irregularities that could be so devastating to an individual or household.

There are at least two dimensions to this progress: the initial surge of progress (monarchs lose power to merchants) and the gradual, continued dispersion of that progress (minorities gradually win the right to vote - minorities as varied as blacks, women, and conscripted 18 year-olds).

Such a measure of progress takes into consideration technology. Cars, computers, and even iPods give a person more autonomy. But this measure of progress also takes into consideration social inventions - credit cards, civil rights, and the joint-stock corporation.

By this metric, policies can be evaluated. Does the new legislation provide more autonomy? To whom? At what expense?

The Post-Capitalist Corporation

The corporation will soon undergo a transformation akin to the change of the nation-state during the age of Enlightenment.

Once the medieval church lost its grip on Europe, the modern nation-state grabbed power. For centuries, religious wars defined European politics. Huge swaths of the population were murdered by competing religions that used monarchs and rebels to compete for ascendancy. It was not until religion was made a personal matter and nation-states focused on issues of politics that warfare became less frequent. Governments could focus on quality of life instead of imposing religion through force.

Today, power has shifted from capitalism, from "the bank," to the corporation. JP Morgan sat on corporate boards and formed corporations like General Electric and International Harvester. The purpose of these newly formed corporations was financial gain. The aims of the bank, financial returns, still define the aims of the corporation just as the aims of the church to impose a homogeneity of religious belief first defined the modern nation-state.

Talking about the aims of the corporation today without talking about profit is about as odd as it would be to talk about the aims of the nation-state in 1650 without talking about which religion it ought to enforce on its subjects.

The idea of financial gain within the corporation being a matter left to individuals may seem foreign to us, but our grandchildren will accept it as easily as we accept transcontinental flights or leaving the matter of religion to individuals. It is yet another dimension of turning employees into entrepreneurs, of giving the individual more autonomy.

Transform Self or Transform Society?

"We have become the tools of our tools," Ralph Waldo Emerson wrote some 150 years ago.

Think about the various ways in which we subordinate our goals to the goals of our tools - the institutions like bank, corporations, and nations that, presumably, are mere tools for humanity. People go through hell because of odd religious beliefs, suffer financial stress after banks give them money, and miss out on profitable opportunities because of work commitments.

One of my beliefs is that we're on the verge of a new economy, a social revolution. The Industrial Revolution did at least two things: it transformed that era's dominant institution (the nation-state of absolute monarchs) and it helped society overcome the limit of capital. Banks, bond and stock markets, and factories were all social inventions designed to overcome the limit to progress - capital - and their explosion in popularity defined the Industrial Revolution.

In the last century, another economy emerged. This Information Age transformed society's dominant institution (the financial market of robber barons) and overcame the limit of knowledge workers. The modern university, information technology and the modern corporation were all social inventions designed to overcome the limit to progress - knowledge workers - and their explosion in popularity defined the Information Age. The new economy will not be designed to overcome the limit of land, capital, or knowledge work. Rather, it will be designed to overcome the limit of entrepreneurship. It will transform today's dominant institution - the corporation.

What is entrepreneurship? It is the act of social invention, of institutionalizing a source of value for the community. Steve Jobs and Henry Ford are entrepreneurs; less obviously, so was Thomas Jefferson and Martin Luther. They are to organizations what inventors are to products.

One element of entrepreneurship rarely commented upon is the relationship of the entrepreneur to the institution. Most of us conform our selves to the institutions in which we find ourselves; an entrepreneur founds an institution that they conform to the entrepreneur.

The economy of the last century was defined by the popularization of knowledge work. Think of the explosion in the levels of education from 1900 to 2000. In 1900, only a small fraction of the American population between the age of 13 and 17 was engaged in formal education; by 2000, only a small fraction was not engaged in formal education. Imagine a parallel with entrepreneurship during the next fifty years.

The economy of this century will be defined by the popularization of entrepreneurship. One consequence is the transformation of what it means to become better. Efforts to change the self - self-help, "becoming a better person," and realizing one's potential -- will themselves be fundamentally changed. Instead of working to conform the self to society, we'll be conforming society to our selves. I don't believe it is possible to overstate the implications of this shift.

Western Civilization has been defined by amazing institutions and the role of the individual has been to conform to those institutions. We are called up on to be good Christians by the Church, good citizens by the nation-state, fiscally responsible by the bank, and good employees by the corporation.

What if the average person were shaping institutions to realize his or her potential rather than conforming to institutions?

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.