Supply and Demand Vs. Selection of the Fittest
- Selection of the Fittest
The Corporate Bleed
Birthing Pains: Labour in the Knowledge Economy
Challenges in applying traditional knowledge management techniques (KM) in the metanational model lie in the “stickiness”, subtlety and complexity of knowledge in distant and unfamiliar environments. IT-driven techniques like online communities of practice expertise locators may not be sufficient for the tacit knowledge that need to be tapped; rotation and co-location of personnel will be required.
From Global to Metanational: How companies win in the knowledge economy
By Yves Doz, Jose Santos and Peter Williamson
By Yves Doz, Jose Santos and Peter Williamson
Capitalism: An economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.
FreeMarket: A market economy based on supply and demand with little or no government control. A completely free market is an idealized form of market economy where buyers and sellers are allowed to transact freely (i.e.buy/sell/trade) based on a mutual agreement on price without state interventionin the form of taxes, subsidies or regulation.
Supply and Demand: In a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at current price) will equal the quantity supplied by producers (at current price) resulting in an economic equilibrium of price and quantity.
Wage Labour: the socioeconomic relationship between a worker and an employer, where the workers sell their labour under a formal or informal employment contract. These transactions usually occur in a labour market where wages are market determined. In exchange for wages paid, the work product generally becomes undifferentiated property of the employer, except for special cases such as the vest of intellectual property patents in the United States where patent rights are usually vested in the original personal inventor.
Value-Add: Marketing – Creation of a competitive advantage by bundling, combining or packaging features and benefits that result in greater customer acceptance.
Mal: I'll tell you a riddle. You're waiting for a train, a train that will take you far away. You know where you hope this train will take you, but you don't know for sure. But it doesn't matter. How can it not matter to you where that train will take you?
It’s a common theme in the global social zeitgeist; capitalism, as a system, is dying. It’s a sexy slug-line, implying endings and beginnings and uncertainty, all the things that make an information-thirsty populace pay attention. It’s also anything but a universally-held position; there remain ardent free-market capitalists who believe that capitalism is not only the best system we have, it’s the only system that actually works. They point to communism or, Clemens-like, take a shot at feudalism, to prove their point.
My perspective is a bit different, but then I don’t see social systems as resting on a left-right spectrum. When I look at capitalism, I don’t see a rusty old car that’s in need of replacement nor a durable Ford designed to last the ages. Instead, I see capitalism as a car seat that we have collectively outgrown. It did the job it was designed for, but we’ve moved beyond and now, the straps are chafing. What we want now – what we’re telling ourselves we need – is new direction, and we’re looking increasingly not to the top, but to the labour class to provide it.
Suppy and Demand vs. Selection of the Fittest
I am by no means an economist; my perspective is based on a whole host of fields with which I’m more familiar, plus what I do know of economics. So, feel free to fact-check me on any of what follows. I’m actively hoping you do; your input is how I’ll learn.
If capitalism were a carpet, the free market would be the fabric from which is it woven. For its part, the free market is all about natural supply and demand – if you’ve got the threads people are looking for, they will pay for it. If there’s a product that someone wants, other entrepreneurial types will get into the racket of spinning it, too. The resulting production, pricing and access is supply and demand.
The supply-and-demand cycle works like this:
If I understand correctly, equilibrium price is the price at which the quantity of a good or a service that people want and the quantity of a good or service that a producer is willing to supply are the same. As in gravity, the ends are always pulled towards the centre.
To make sure I have the gist, let me put those four points back to you through an analogy:
1. If there are more wolves than there are deer, the wolves are forced into stiffer competition for the limited food source; a lack of venison or being killed off by competitors reduces the wolf population, finding balance
2. If there are less wolves and the supply of deer remains unchanged, this leads to less aggressive internal competition between those wolves remaining
3. If the number of deer increases disproportionately to the wolf population, then existing wolf populations can collectively eat more; this allows them to produce more, healthier offspring likely to survive and grow the wolf population
4. The more healthy wolves there are, the more mouths there are to consume existing deer; the “boom and bust” cycle is reset.
In this case, equilibrium is the balance between the deer and wolf populations (I’m sure there are producers who wouldn’t like the comparison to wolves and consumers who don’t see themselves as deer).
What do you think? Is this a fair comparison? Is likening the capitalist free market and the ecological food chain comparing apples to apples?
Let’s line them up and see:
In the evolutionary food chain, predator and prey evolve together. It’s the weakest or slowest deer that gets eaten; it’s the weakest or slowest wolves that don’t get the food or don’t have surviving offspring. This process is called natural selection – the boom and bust of the population ratios maintains an escalating arms race of biological adaptation. Only the strong survive, so each successive generation of deer and wolf are more competitive than the last one.
This kind of fits in with the concept of the free market. To give a Canadian example: our winters are cold and (at least, generally) snowy. The cold and snow feed a market for winter footwear. If I produce a winter boot, there will always be a Canadian market for it. If nobody else produces a boot, I own the market and can charge whatever I want.
The scent of boot-making profit will lend itself to some entrepreneur making a boot that is better than mine, or cheaper or both; I now have competition. I’ll need to start either reducing my per-boot profit margin or, if I’ve been honest with my customers and am actually charging market value for my products, I might have to lower production costs, possibly by culling labour. Or, I can zero in on a different segment of the market, perhaps aligning my production and sales strategy towards lower-value products for a lower-end market.
It looks like this is where the paths of the free market and selection of the fittest models separate:
- Nature never intentionally targets the “low-end” user – there will always be a weakest link, but each generation sees that weakest link grow a bit stronger. The very process of evolution is designed to kill off the bottom end, in perpetuity, like a snake eating its own tail.
- Selection-of-the-fittest evolution never reduces production costs to create a better product. How could it? The whole process is designed to eliminate the weak; reducing that which goes into making a strong product (food, for instance) would completely throw the system out of whack. In the event of an ecosystem-level food shortage, the animal which requires less sustenance because it is smaller or has a slower metabolism could theoretically be selected for continuance, but wouldn’t it lose out in resource access to its stronger, faster neighbour? Even in species that reallocate consumption drives (hibernating animals are an example) the intake isn’t reduced; it’s weighed differently over the spectrum of the seasons. The closest equivalent in nature, then, would not be evolution but something like a brush fire.
- While species aren’t looking to adapt, is there not a trend towards complexity, not simplicity? No species has evolved into a single-celled organism, but nature is full of examples of evolutionary complexity. Each increase in complexity is matched by an increased need in both production costs and consumption requirements. Even humans with our reconfigured feet and shrunken tails have gained complexity elsewhere in our anatomy. Think humans are the pinnacle of evolution? You see my point.
While evolution is about selling oneself and evolving the best traits to make one desirable, the free market economy is about producing stuff and selling it as widely as possible. Take ugg (or Ugg) boots; selling uggs for summer wear is the equivalent of a yak evolving to grow more hair off-winter.
Which brings us to our next piece:
Marketing is an inherent biological function except in evolution, the billboards are called adaptations. A peacock’s tail is the best-known example. It’s a tricky business, this – one or both sexes of a species want to appear attractive and healthy to the other sex, yet equally be unattractive or offensive to predators. It’s a tough balance for males, in particular; they tend to trend more towards one end of the spectrum or the other. The success at which a given animal finds this balance (or equilibrium) is the difference between passing on one’s genes and extinction.
The point of the free market isn’t selection-of-the-fittest – it’s sales. Supply and demand isn’t about what people need – it’s about what they want. People’s needs are pretty simple; if capitalism was limited solely to fulfilling people’s needs, it couldn’t function.
While evolution is all about meeting an existing need to a stronger degree than the next guy, free-market capitalism is about fabricating and selling “wants.” As a result, marketing in the capitalist model is largely directed at redefining a want as a need.
The classic example is keeping up with the Joneses. Little Johnny comes home from school and says that Timmy Jones has a new pair of fancy shoes. Johnny wants a pair. “Why?” asks Johnny’s parents. “Because”, little Johnny replies, “those shoes are cool; if I don’t have them I won’t be as cool and therefore, not as popular.” This is social selection – the jock gets to date the prom queen, etc. Yet, everyone gets to procreate.
There you have it – from sneakers to Scotch to cosmetics, marketing is all about externalizing the peacock’s tail. Where evolution uses marketing to demonstrate what an individual has, capitalism uses marketing to promote what a product will (theoretically) permit an individual to become.
Of course, you can’t market a fabricated need unless you have a product, nor can you sell it unless you know how to turn that product into a need.
Supply and demand in nature works thusly – the stronger, faster wolf will get the quicker deer. That’s not the whole story, though – otherwise, why would deer have antlers? Like the peacock’s tail, antlers aren’t designed with predators in mind, but are instead designed a) as signals of health, strength and virility for potential mates or b) to allow one to compete more effectively against other would-be suitors. Staying alive does you no good if you can’t reproduce and in sexual selection, It’s not the best product that gets sold, but ultimately the best looking one.
Selection-of-the-fittest, then, pulls in at least three directions:
- what allows an animal to evade predation
- what increases one’s desirability to potential mates and
- what helps provide an edge over competitors.
Where variance happens it’s either along an established trajectory or, every now and then, a result of a mutation that proves advantageous and, through selection, gets added to the mix. When mutations or “outlier” genes are incorporated, unexpected consequences beyond an established trajectory result.
Absent from this process are two components key to capitalist matrix as we understand it; proactive innovation and collaboration. This is because neither of those things are part of the selectionist model; in evolution, change isn’t sought. Technically speaking, the “best” species are the ones which have found the right genetic mix early on and have no impetus to change. In species like the shark, coelacanth or crocodile, no major variance, no exceptional expenditures have been necessary. As it happens, none of these species are overly collaborative. The selection-of-the-fittest model is anti-collaboration; if you’re working with someone else, you’re promoting their ability to compete with you, a no-no in the field of selfish success.
Capitalism, however, relies on innovation – if that weren’t the case, we’d have nothing to sell. The winter boot example? Boots aren’t a genetic mutation, they are a fabricated product that’s been informed by a combination of what’s in nature and what’s been innovated or produced before it. The same holds true for every single product designed in the history of our species; we didn’t need them, for if we did, we couldn’t have existed without them. The history of technology is therefore a story of turning wants into needs.
Doesn’t that defeat the entire argument? Am I not saying that the capitalist system is what we’ve been evolving towards?
You might say that, except for one niggling thing – the capitalist model doesn’t account for innovation. Capitalism is about the production, ownership and demand for products. The free market is about unregulated buying and selling. Supply and demand accounts for goods and services, but without offering any insight as to where the stuff being sold is originated. Production implies collaboration and specialization; ownership is proprietary; demand is, well, want. But where does innovation fit in?
Here’s what I think: the process of innovation is separate from and therefore not inextricably linked to capitalism.
Wrong! Say the free-market purists. Capitalism is the very essence of innovation – what do you think creative destruction is? Joseph Schumpeter defined creative destruction as a “process of industrial mutation that incessantly revolutionized the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” That sounds more like the previously mentioned brush-fire; creative destruction creates vacuums, which nature abhors, but it doesn’t fill them.
In a paper titled Self-Reliance and Creative Destruction, Bryan Caplan argues that the competitive nature of the capitalist system promotes individualism, which in turn promotes independence and critical thought. These, Caplan suggests, are the tools that incent people to be creative. I can only think that Caplan isn’t a student of politics, or he’d know that independence and criticism don’t necessarily equate with creativity.
To Caplan and the other free-market purists, I would suggest that correlation does not imply causation. Just as the evolutionary impetus behind a deer’s antlers or the peacock’s tail didn’t result from those animals’ need to avoid predation, the role of creativity in the development of the capitalist system doesn’t mean that capitalism causes innovation. Capitalism, as a system, might have provided the opportunity for creativity to flourish, but that’s equally true of feudalism and entrepreneurship. I doubt there’s a capitalist out there who would suggest you need to have a feudal society for entrepreneurship to thrive.
The conditions of feudalism and the rise of the city provided an opportunity for entrepreneurialism, the seed from which capitalism flowered, to blossom; the capitalist system served as a crystal, focusing the pre-existing light of creativity in intensity.
Creativity preceded both capitalism and feudalism; in fact, the proclivity for innovation is completely separate from our social systems. The ability to innovate is a biological one, not a social one. While our brains give us the capacity to create, nothing comes from nothing – we need exposure to raw material, ideas, language, best practices and failed initiatives to add content and context for the act of creation itself. Like the environmental changes and evolutionary whimsy led to the development of the wing, our progress through social systems like feudalism and capitalism have allowed our imaginations to take flight.
- By reinterpreting wants as needs, Capitalism has caused us to be individually exposed to more of everything, even more so as marketing evolves
- Research and development has required greater collaboration and a stronger degree of goal-identification and planning (functions of our creative brains)
- Market expansion and specialization have both led us to consider new modalities more closely, again fostering the understanding and relating that are inherent to socialization
If you want to talk about creative destruction, you can’t beat that – the very traits that led to capitalism’s success are hastening its expiration date. That, of course, is how evolution works – nature leans towards complex systems, from individual structures to networked ones.
Remember how I said that selection-of-the-fittest evolution never reduces production costs? Did you follow the links to see how the evolution of the human brain has led to a longer gestation period and an increase in the need for consumption to meet the demands placed on our bodies by our hyperactive brains? We’ve just established that capitalism increases production costs as it facilitates the evolution of ever more-complex products. Complex products require specialized skill sets to both innovate and make them. Specialization requires collaboration; you don’t build a car in silos any more than an eye develops independent of a body.
Here’s where capitalism collapses in on itself.
Capitalism is a vertically integrated system; the wealth flows to the top, just like blood to the brain. What happens to the social organism, oddly enough, mirrors what happens to the human body – if all the resources flow to one organ, the rest of the body atrophies. What does social atrophy look like? It looks like unemployment, debt crises, a rise in mental illness and an overall discontent with the system.
This, then, is what is happening with capitalism. Like the car seat analogy, the supporting structure which kept us safe thus far is starting to chafe. We need an upgraded model that fits us better as we continue to grow along our journey.
The Corporate Bleed
As is always the case with evolution, the seeds of the future lie within the matrix of the present. If we accept that social evolution follows the same rules as biological evolution, a look at the state of the most social animal on the planet offers some clues as to where we’re heading. Our bodies are highly specialized, integrated entities that protect themselves with rapid-response systems (like the military). As we have evolved in physical complexity, we have required an increasingly sophisticated neural net (the tools of communication, best expressed by the Internet) to ensure the right signals get where they need to. Coordinating all of this activity requires executive function (like government) that, by its nature, also has to plan. Planning involves the creation of goals – after all, every journey has a destination.
Organisms require collaborative, coordinated specialization. What does this look like in society? Not individualistic decentralization, as our free-market friends are likely to argue. The social, historical trend moves in the opposite direction, from feudal fiefdoms to nation states to broader unions, mirroring the evolving integration and complexity of multi-cellular organisms. The body has a neural net – society has its networks. Like the GoldCorp example linked to above, successful companies are engaging in corporate collaboration, turning to the specialization of others to foster their own goals. The provision of opportunity is replacing the provision of means of production as the ticket to success. That’s the thread of capitalism that is carrying over – through a form of “collaborative competition,” individual needs are being transformed into collective needs.
Birthing Pains: Labour in the Knowledge Economy
“See my people?
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Of what this country
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Well, here's my theory
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The Knowledge Economy is a bit of a misnomer, but it flows off the tongue a bit easier than “The Idea Economy.” That, ultimately, is what companies and governments are looking for – innovations, new products, new processes, new systems of organization, new perspectives. We’ve come a long way since Henry Ford and the introduction of the assembly line.
There are two trends here that are worth pointing out:
First – the contracting boom-and-bust cycle of mechanization/human labour. Domesticated animals and ploughs made it possible to get more for less, and for a very long time, that was that. The gestation of the urban environment pushed work further into the hands of the labourer, with more complex machines allowing for more complex tasks. The industrial revolution put the stress back on machines; technology was now so incredibly complicated it required specialized labour not only for its manufacture, but its maintenance. Where are we at now? Longer working hours, the bleed of work into personal life and computers so complex that we are actively discussion the concept of Artificial Intelligence. Each pulse comes a bit faster, increasing the demands on man and machine, integrating us both more fully into the act of production.
Two – alongside all the technical evolutions in human history have come evolutions in individual rights, both a balancing of the playing field and a facilitation of human activity. This is an interesting nugget to chew on; we think of the collapse of feudalism or the emergence of the labour rights movement as bringing about power to the people, which it has, but the sidebar piece is that each wave of empowerment allows for more complex labour to be performed successfully. Access to the means of production, health and safety and training all allow for the individual to push themself a bit further, encourages them to invest a bit more of their time and energy in their work. Now, there’s a trend towards e-conferencing, working from home and personal computers.
Here’s the trend for the individual:
- Serfs or slaves were indentured servants – great for cooking and cleaning, but was just living enough to warrant doing that little bit more?
- Home, hearth and a paycheque offer some security and independence, which is good, but is it enough?
- Vacation time, sick days and benefits give you something of your life back, but are they enough to compensate for the long hauls of labour in between?
- The opportunity for advancement, a bigger paycheque and some recognition make it a lot easier to get up in the morning, but when you only live once, what would you rather be spending your time doing?
- Love what you do and do it well; be part of a team, collaborate, innovate, stretch yourself, enjoy your work – then living to work isn’t a burden, it’s an opportunity
When time was, it was called “other duties as required” – taking on any new job, you knew there was going to be a bit more asked of you and that “something more” would probably stretch your abilities and possibly overstep the value being given for your labour. This was certainly a shift from the assembly line where people were literally cogs in motion. These days, “other duties as required” is called “value-add”; instead of asking you to do more, the employer is now asking employees to sort out what the extra mile looks like. The power of determining the vision is being shifted from employer to the employee. Value-add comes with the implication of great rewards, but there is a responsibility to create, as well.
Here’s are the trend-lines, then:
- Power shifts from a few individuals increasingly towards the collective
- Technology develops to facilitate individual contribution
- A sharpening of morality – “rights and responsibilities” – allows for greater individual benefit at the cost of greater collective contributions
- Moral, or pro-social behaviour is the corollary of creative, innovative ability (both are products of the “new” brain)
- The more we work, the more we want out of work, the more we invest ourselves in our work
- The nature of work (computers, networking, creative collaborations) and the nature of play (computers, networks, creative collaborations) are colliding
IQ tests feature pattern recognition questions – look at what’s come before and use the evidence to figure out what’s next. This is the pattern I see:
Cognitive ability and collaboration expand within an existing social model until that model can no longer contain the growth; when the limit is reached, a period of civil unrest serves as social brushfire, burning away the elements of the old model that were restrictive. New growth allows for developmental progress to continue; the empowerment and integration of components result in a stronger, more adaptive whole.
The industrial revolution saw an increase in the capacity of physical labour, which was matched by an increase in physical strain. As social friction and the sheer inefficiency of ignoring the physical health of labourers weighed upon industrialists, compensation and eventually, labour safety were introduced. This carries on into benefits. Now, we’re into the knowledge economy – physical labour is less important than mental, cognitive labour. Cognitive ability is proactive, creative and therefore, more intensive and demanding of the individual. It therefore requires a greater degree of support, training and accommodation from the employer.
What else is there in the social zeitgeist, accompanying and fostering the collapse of capitalism? An increase in diagnoses of mental illness, a growing realization of the impact of work on the tool it relies on most and a re-alignment of how we define cognitive abilities.
Capitalism isn’t failing – it has done exactly what it was supposed to do. Like all systems, capitalism has reached the end of its productive life. Capitalism is an old skin that society is shedding to reveal the new social model that lies underneath. Movements like Occupy and the Arab Spring are the convulsions moving this systematic molting along. We can see glimpses of the new model’s texture through corporate collaboration, broad social altruism, employee empowerment and accommodation plus the increasingly networked intelligence of the global village.
This next iteration social model will place greater emphasis on individual training, supports and accommodation, but increase the demands of society on the individual. A more level playing field and greater work enjoyment will result in people not minding this shift so much. Cognitive labour will continue its ascendance to predominance, but at the same time will be increasingly reliant on the products of physical labour. Broad social structure will continue to integrate from a series of isolated pyramid hierarchies into a single larger one.
How do we make this transition as easy as possible? By realizing and addressing the common element that has led to the debt crisis, the democratic deficit, rising healthcare costs, an increase in nationalist and aggressive foreign policy and ensuing risk of global conflict. That element, boiled down, is us. The individual choices we have made that we felt were in our own interests – our individual selection-of-the fittest imperatives – keep having negative, unforeseen or ignored consequences on the social systems of which ultimately we are still a part.
Of course, greed, selfishness, fear, anger and their opposites (charity, altruism, hope and compassion) are just processes of the brain, the same as our ability to innovate. Our understanding has led us inwards; we’re studying the mechanics of how our ecosystem works, how our societies function and how our physiology is structured down to the level of DNA. Now, we’re exploring the next final frontier of the mind. The further we peer into the abyss, the more specialized and collaborative our processes become. Training, peer support, collaboration, accommodation and integration – what are those processes but the building blocks of society?
Like it or not, we’re moving away from an individualistic, survival-of-the-fittest model towards a fully integrated, conscious society. It’s not an easy transition – our subconscious, fearing the unknown will attempt to incite us to fight or flight. Others will see the challenges as insurmountable and suggest that answers must come from somewhere else.
To paraphrase an old saying, “God helps those who help each other.” Which is exactly the social trajectory we’re following.
After all – if we can’t work together, aren’t we gonna die alone?