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« The Matrix Demoted | Main | Artchat Survival Guide -- "Postmodernism" »

May 26, 2003

Blog-a-palooza redux


Following a link in your recent posting, Blog-a-palooza, I read two of Tim Hulsey’s interesting posts on the political philosophy of “The Matrix Reloaded.” I don’t intend to beat a dead movie any further here, but Mr. Hulsey’s description of some postmodernist thought got me thinking about its underlying assumptions. Allow me to set up my tiny little conclusion with Mr. Hulsey’s highly lucid summary (you can read the entire post here):

Now in postmodern radicalism, the American Revolution or the Magna Carta would exemplify a "top-down" revolution, while the French and Bolshevik Revolutions would be "bottom-up" models. All revolutions are ultimately controlled, to be sure, for they, too, are part of the Matrix. But a postmodern would argue that the controls get much tighter, and a lot more dishonest, when said revolution is implemented by the masters. Indeed a revolution implemented by the masters would be so insignificantly incremental that it would hardly be worthy of the name. Better to go big and ugly.

You can guess where all this is going, gentle readers. According to postmodernist thought, the Matrix represents the state of life under not totalitarian despotism, but liberal democracy. In both cases tyranny is a fundamental, metaphysical fact of life, but pure totalitarian states are at least honest about it: You don't have a choice, and no one is going to try to convince you that you do. By contrast, in liberal democracy, you are granted the illusion of freedom, so that absolutely everything you do can be controlled. Fight back if you think you can. (This is the basic argument of Noam Chomsky's Manufacturing Consent, by the way.)

Still, leave it to French theorist Michel Foucault to go one baby-step further, with his claim that classical liberalism is not equal to, but actually worse than outright dictatorship.

The postmodernists were hardly the first thinkers along these lines—Nietzsche, for one, described homo sapiens as a herd animal. But there is a significant difference between Nietzsche’s view and those of the postmodern left, despite their attempt to co-opt so much of his thinking: herd animals don’t follow a leader because they’re coerced into following—they follow because they like following, because they’re comfortable following.

I remember noticing, while still in college, that every human society and every organization I was personally aware of was hierarchical. I would occasionally ponder the gaping rift between what appeared to be an almost universal human preference for hierarchy (which, given the normal ratio between leaders and followers, means that most people are showing a preference for being an underling in a hierarchy) and what the radically egalitarian theorists of that era (the 1970s) were preaching.

During my all-too-many years since in the working world, I’ve noticed that very few people are emotionally comfortable exercising what might be called the central task of business: figuring out a vision of the future and being willing to take the risk of committing resources now to meet the needs of that (possibly illusory) future when it is scheduled to arrive. If somebody stands up and says, “I’ve got a vision and I’m willing to put my ass on the line in an attempt to profit from it” there will be a stampede of people eager to line up behind him or her--at least as long as the payroll checks clear.

I’ve told people for years—including my employees—that I think the traditional employer-employee relationship is a far-from-ideal one, and that it’s especially poor for the employees. My argument is that the employer-visionary extracts significant rents for the use of his/her vision by employees—a far more significant rent than capitalists can charge for the use of their capital. I have yet to convince anyone of my argument (and quit working for me as a consequence of my eloquence). Maybe I’m a bad advocate for my own position, but it seems as if people don’t even want to hear what I’m saying.

Now it may be, of course, that people who (sensibly?) lack confidence in their vision of the future are merely playing it smart by adopting a low-risk strategy: taking a salary and saying “Ah, screw the upside—who knows if it’s there or not?” But this quite rational risk-averse strategy certainly doesn’t look anything like the postmodern notion of humanity struggling in the bonds of inescapable external control, lashed by the all-powerful whips of its gloating overseers. It looks more like “Jeeze, here’s another of those crazy guys or gals who thinks they know what the future will be like…let’s take advantage of the sucker!”



P.S. Of course, the similarity of this whole postmodern theory to the excuse of a masochist who doesn't want to take responsibility for his masochism--oh, how you overpower me, you delicious brute!--is a bit hard to overlook. I'd even consider it a possible explanation for this type of thinking if I didn't know what serious intellectuals these Postmodernists are.

posted by Friedrich at May 26, 2003


I think you're onto something, seeing hardcore postmodern theory as paranoid S&M fantasy. It's the only thing that serious pomo theory strikes me as good for. Did you know that the Wachowski Brothers had Keanu read some Derrida in order to prepare for the original "Matrix"?

Posted by: Michael Blowhard on May 26, 2003 8:23 AM

Posts like this are the reason this is my favorite blog. Though provoking and entertaining.

Friedrich, you write:

"...the traditional employer-employee relationship is a far-from-ideal one, and that it’s especially poor for the employees. My argument is that the employer-visionary extracts significant rents for the use of his/her vision by employees..."

Is this a position you now hold, or just used to hold?

Are you saying, in general, employees are underpaid? Can you elaborate on this a bit? Given that most business ventures lose money much of the time, or fail outright, and that all the risk is on the entrepreneur...I must disagree.

If the employees are getting a rotten deal, why don't they become entrepreneurs?

Posted by: Paul Mansour on May 26, 2003 9:20 AM

I actually think it's the amount of energy people want to devote to securing their financial future as opposed to other emotional/social/artistic elements of their future. People who are entrepreneurs are willing to put their financial asses on the line (although one could argue that always sitting in the chair of being "in charge" may actually be avoiding certain emotional learning experiences) and in turn are willing, for a period of time (and often quite a long period of time) give up all their time and energy to that vision, leaving little time for other ventures. I just never was willing to make the trade, in spite of various workplace frustrations and aggravations. Like right now, I'd much rather be surfing the net and listening to Rod Stewart's American Songbook (hearing Rod sing "the winds of March that make my heart a dancer"--gotta love it!) than be in frantically trying to make the new product launch work. However, it is probably true that I have traded away my skills for a smaller return than I MIGHT (might) have made otherwise. Oh well. I do not think of this moment as masochistic (humming "these foolish things that remind me of you" and smiling).

Posted by: annette on May 26, 2003 9:59 AM

Hey Paul, I'm curious to hear what you and Friedrich think of my attitude towards the same question. Or sort of the same question, anyway. We may be saying very similar things, I can't yet tell.

In my view (and for the sake of simplicity), there's you, and there's the commercial world. You choose to interact with the commercial world as you see fit. You may or may not need or want some of what it offers (primarily money). There's a range of ways to interact with it: At one extremem, you can pitch yourself body and soul into this relationship, which seems to be what entrepreneurs do. You can limit your interactions with it. At the other extreme, you can choose to avoid interacting with the commercial world as much as possible.

I find it useful to think in this way. For one thing, it helps answer the question "why aren't more people entrepreneurs"? Answer? Why would we expect many people to be, given that that the choice to be an entrepreneur is at one extreme of the continuum? We'd in fact expect relatively few people to choose to entrepreneurs, and this does seem to be the case. On the other hand, we'd also expect there to be relatively few people who choose to avoid interacting with the commercial world entirely. Partly because most of us need to make some money. But it's possible for trust fund people and hermits to largely shun the commercial world. We just wouldn't expect there to be many such. What we'd also expect is that most people are going to choose (consciously, semiconsciously, unconconsciously) some stance vis a vis the commercial world somewhere more in the center of the continuum. Pictured that way, the commonness of "being an employee" makes a lot of sense. We know that most people have to make some money, and we'd expect that most of them don't want to be entirely consumed by their interactions with the commercial world. There are other ways of situating yourself in the middle, of course (say, doing parttime freelance work, or other forms of self-employment that aren't really entrepreneurial in the larger sense), but "being an employee" is one plausible and probably semi-attractive option for the big mass of people.

I find this picture useful. Do you? It's true that many people don't think about the "how am I going to interact with the commercial world" question very consciously. But I don't think that makes the general picture less useful. It just means that some decisions are made consciously and some unconsciously, and ain't that the way life is.

My picture does lead me to one conclusion/conviction/hunch about education, which is this: that it's important to help people understand the nature of the commercial world -- how it works, how the game's played, etc. Why? Because if they've got a grasp of basic econ and business, they're likely to be able to make somewhat wiser (and certainly better-informed) life choices.

Cultureblogging thought: It might also help clear out a little space in the heads of arts people, who tend to have a terrible time understanding, and reconciling themselves to, the basic laws of supply and demand.

Posted by: Michael Blowhard on May 26, 2003 10:16 AM

Whoops, Annette and I just commented at the same time. Seems to me Annette and I have the same take on these things. You go, Annette! Interested to hear how you more entrepreneurial types see these things.

Posted by: Michael Blowhard on May 26, 2003 10:19 AM

Thank you for the link!

It's true that our postmodern anti-humanists have some tradition to fall back on: Nietzsche is considered one of the first anti-Enlightenment thinkers on the block (though some philosophical revisionists have impishly included Rousseau among their ranks).

Interesting, too, to hear your Marxian -- but not Marxist -- critique of the post-industrial employer-employee system, with employees paying "rent" on the employer's vision capital. That explains a great deal about the workings of capitalism, including why CEOs receive such a large share of company profits.

You're also right to note that there's a strong S&M component to postmodernism as well -- which is why Michel Foucault spent the last several years of his life exploring "new economies of pleasure" in the leather bars and back rooms of San Francisco's Castro district. Still, the S&M of postmodernism is neither consensual nor concrete, but metaphysical and inevitable. That's probably why most sadomasochists don't strike me as very pomo -- they just want to feel (or swing) the lash, and never mind the metaphysics.

Posted by: Tim Hulsey on May 26, 2003 10:23 AM

Friedrich - write that career/management strategy guide right now. "Doodles from the Herd," "Sketch Your Way to Alpha Status," or something actually clever.

I like to hear your ideas on a subplot you didn't mention. You claim that if someone says, "“I’ve got a vision and I’m willing to put my ass on the line in an attempt to profit from it” there will be a stampede of people eager to line up..." In my experience, ideas count for squat unless the speaker has already established some alpha cred. Horribly, if someone establishes alpha cred, then even the most stupid, short-sighted ideas of that leader will be respected by most of the herd. This latter observation fits Fried's theory entirely and is - and I think plenty of people believe this - responsible for half of what goes wrong in the world. Maybe 80-percent.

So, Fried, in your theory is this scenario likely: The non-herd type is somewhat likely to, because of being able to step back and see the big picture, have ideas and yet, because of being outside the circle, unable to sell the vision. So, they make their contributions as well as they can and are either okay with that or frustrated. A real-life example might be Annette pushing only for ideas that aren't too much trouble to manage and then going home to her life free, more of less, from the stress of politics. That's not lack of faith in a vision, I don't think, so much as a cost-benefit analysis. (Incidentally, in animal groups, it is frequently not the pack leaders who find food and water and places to live and care for the childrens. Especially when the leaders are male. Often male leaders don't contribute anything to day to day life for their species. Instead they hang around fighting with other males who hope to lead - much like in the human world. Sociobiologists ignore the full complexity of non-human life at their peril.)

As an aside, little monsters like Blair Hornstine and Jayson Blair seem perfectly willing, eager even, to take all the risk of jockeying for position and currying favor and yet appear downright phobic about the real risk of putting ideas out there. Very much a dumb-animal herd-based view of the world - and we have a figure of speech, curry favor, straight from the pack world to describe it.

"Why aren't more people entrepreneurs"? More people isn't a very exact number, you know. Minority women, the group most likely to be at the bottom of the pecking order, are choosing to be entrepreneurs. This trend is slow and steady.


For what it's worth - S&M has always struck me as, mostly, an overly serious game of dress-up. When people go on and on about their S&M or B&D rituals and props, it sounds so much like when people go on and on about their Sims. Such fantasy-based narrow-mindedness is certainly an aspect of po-mo, though certainly not unique to that particular way of defining the world.

Speaking of games bases on game-playing, and totally sidetracking the comments box, anyone hear of people who have sex games inspired by PS2 worlds? I'd find that more palatable that Buffy fans who get off on the idea of getting off on drinking blood. More palatable in the sense that room-temperature grits are more palatable than ice cold lumpy grits. If you want to take a cue from TV, go for something fun like the Bloodhound Gang's "You and me baby ain't nothing but mammals so let's do it like they do on the Discovery Channel!"

Posted by: j.c. on May 26, 2003 2:27 PM


"Annette pushing only for ideas that aren't too much trouble to manage..."??

(a) I doubt too many of my employers would entirely agree with that assessment and
(b) it's a rather lightweight description of me from someone who doesn't really know me, but who knows...

I don't recall saying that at all. What I said was that I wasn't willing to risk capital in an all-or-nothing bid for a paycheck---that I had other areas which demanded my energies, or where I simply wanted to put them, and that does not seem in sync with trying to be an entrepreneur. As far as going home relatively free from politics?? Hmmm. I think the boss of his/her own business is far freer from politics than someone who has had to navigate the very hierarchy mentioned by Friedrich in large corporations as I have done.

But I like going home free of politics, big waste of energy, actually.

I am interested that I am used as the lightweight example rather than Michael Blowhard, who seems to feel the same way I do. Don't want to piss off the landlord, so to speak?

Posted by: annette on May 26, 2003 7:02 PM


I’ve been mulling over your theory of “participation” on and off all day, and I’m not quite sure what I think of it – something seems amiss, maybe it is just terminology.

Here are a few (not particularly well thought out) comments:

Does a private in the army participate less fully than a general in a war? It seems that people may just participate in different ways, rather than more or less.

Who is participating more in the commercial world, a small dairy farmer in rural Pennsylvania, or a arts-loving, museum-going bar tender in a hot night club in NYC who takes homes (and spends) twice as much pay?

Equating high participation in the commercial world with entrepreneurship may not be quite right. Many of the highest salaried professionals work a brutal number of hours. They are usually not entrepreneurs. The entrepreneur that everyone seems to have a picture of is the high-flying, software/internet/telcom businessman like Jeff Bezos or Gary Winnick, rushing off to meetings, frantically trying to get a product out the door, and never making their kids softball games. My guess is these types are vastly outnumbered by mom-and-pop entrepreneurs, running small, slow growth businesses, ($1 to $20 million size, say, 5 to 50 employees). Think commercial laundry, glass, sign installers, tuxedo rental, construction and what not. Many of these people have as much if not more of a life outside their business than do salaried employees.

Posted by: Paul Mansour on May 26, 2003 8:50 PM

Hey, feel free to call me a lightweight anytime.

Posted by: Michael Blowhard on May 26, 2003 10:14 PM

Hey Paul, I think you're introducing lots of things well worth wrestling with, and you're certainly making me refine my proposal. How about this: people choose how to interact with the commercial world. And they can do so on any number of bases (how much or how little to do so, but also: desire to get rich; desire to have lots of spare time; religious convictions; self-delusion; desire to be your own boss; desire to travel; need for health insurance; love of, or aversion to, risk-taking; whatever).

I guess what I'm reacting to -- which I'm sure isn't what you or Friedrich are suggesting -- is an assumption thinkers about work and the economy often seem to make: which is that people don't choose how and on what basis to interact with the commercial world. It's just assumed that they're participants, and gosh darn it, why aren't they behaving more rationally? My point is simply that perhaps they are being rational and they are making conscious choices, and perhaps "how, and on what terms, to interact with the commercial world" is one of the things they think about, and make choices about.

It occurs to me that I may be being unclear. By "commercial world" I'm not thinking so much (a little, but not a lot) about the shopping and buying end of things as about the making-money end of things.

Very curious about your thoughts here...

Posted by: Michael Blowhard on May 27, 2003 12:33 AM


I had no idea that the W brothers would force something like Derrida on Keanu Reeves. I'm torn between thinking "shame on them" and giggling at the idea for a piece of sketch humor on "Teaching Actors Postmodernism."


I'm not contending that employees are getting screwed. They're big boys and girls and they make their own choices--choices that I believe are far more rational than postmodern liberation theorists seem to believe. I find it perhaps significant that none of these theorists--to my knowledge, anyway--have had considerable experience in the business world.

To dilate on my probably silly theory, however, I believe that in virtually all cases, an employer-employee relationship could be turned into a service business owned by the employee, or by a group of employees, and that such a business would be able to charge a premium above the former salaries of those employees. Why would an employer want to deal with such a service business? For several reasons: (1) when the former employer's business is slow, he's not obligated to keep up the same level of activity, so there's a transfer of risk away from him to the service business; (2) his former employees would be more useful because they would start dreaming up "value adds" that would never occur to them as employees; (3) his former employees would develop their own vision of the future and bet on it by investing in new techniques, technologies and training, which would make them more valuable (employers don't have the time, money or energy to maximize more than a small fraction of the various aspects of their business, and this "fragmentation" of his business into constituent parts would ultimately increase productivity, quite possibly drastically); (4) his former employees would start branching out and working for companies other than his, so they would provide a channel for useful information on how other organizations handle similar challenges, etc., etc. I further believe that employees don't do this for many reasons, which include (1) like most people, employees are trained from childhood to not believe in themselves and to believe in authority figures (a truly disfunctional religion--which may well be genetic, since it so obviously is resistant to experience with real world authority figures, all of whom are so obviously fallible); (2) many employees aren't interested in making more money if it comes at the cost of things they like better, such as hobbies, family, spare time--I don't believe most people are income maximizing, or even close to being so; (3) lack of training and experience in developing a vision of the future--I'm not aware of any schools or training programs that focus on it, per se.


I think you're right (see my response to Paul), and I want to stress that the point of this post was not to criticize people for not being entrepreneurs. I just used the well-known small-minority status of entrepreneurs as an example to illustrate my more general point that most people appear to be fairly comfortable with the notion of other people leading them. This has led me to wonder if elites truly possess systems of control that are really so wonderfully powerful (a la the fantasies of Postmodern theorists), or if a simpler explanation is possible: that hierarchies ("power relationships") exist because people--including the "underlings" as well as "elites"--are comfortable with that arrangement. I have frequently speculated that the "leaders" are actually the ones being subtly controlled by the masses--conned into doing their dirty-work for them.


Again, thanks for doing all my heavy lifting by summarizing the po-mo political position on your blog; I would never slog through enough of that stuff to be able to sum it up so neatly on my own. In the one book by Derrida I tried to read I ended up with serious intellectual doubts about the very first, most basic example he used to introduce his ideas (I didn't think it illustrated the point he was trying to make at all, but rather a very different one), and concluded this book and I weren't made for each other. I guess I'm just a wimp, intellectually.

However, I think you missed one key point in my piece (which was probably obscure--ergo, my fault). I'm not trying to criticize Po-Mo by linking it to a "deviant" sexual practice (i.e., sadomasochism); what I was saying was that Po-Mo theorists who are obsessed with power but want to talk about it in terms of liberation (or even in terms of the impossibility of liberation) are morally similar to a masochist who doesn't want to be honest about being a masochist--in short, my criticism is that Po-Mo looks like a very complicated way of not taking responsibility for one's actions/obsessions. (Small aside: why do you think Plato's not a Gnostic? Surely you don't think he dreamed up a whole set of ideas that appear to have been kicking for millenia totally independently, do you? I guarantee you he was working off a non-Greek source; remember Nietzsche's very perceptive comment that Plato's real ambition was to found a new religion, not to practice philosophy.)


Thanks for the endorsement of my new book on management: it'll be in bookstores early next month.

I don't think it's nearly as hard to get what you refer to as alpha cred. When I went out on my own, I dressed up in a suit and went to many business meetings, thinking privately the whole time: "I am such a fake." Very gradually it came to me that I wasn't fooling anyone; they just found it in their interests to do business with me, because I was standing there in front of them offering them a deal that appeared to address their needs and there was nobody with any more credibility in sight. In short, if you can think your way into the situation of your customers, partners, etc., and figure out a solution that nobody else is offering (at that exact time or place) most people will take a flyer on you. That goes double for employees: nobody's going to work for you as an employee if they have a viable opportunity to work for IBM, but...guess what? That's not an option for very many people. The whole art of business is to recognize the risks of everybody involve, and to offer them deals that won't be perfect, but are better enough than their current alternatives.

I suspect that this is what minority women are figuring out--that there's a lot more space between existing economic structures than inside them. Granted it helps to be a bit of a salesman. But that's a topic for another post--why salesmen and saleswomen are the most important people on the planet.

Posted by: Friedrich von Blowhard on May 27, 2003 1:19 AM

I'll readily agree that salespeople are vitally important. I'm an aweful opener but a great closer, which has influenced my career a lot.

Part of the problem with extreme levels of outsourcing loke you describe are that politics always resurfaces in the newly factored service business as a way to determine what THEY do. And sharing information about other clients with one is anathema to that entire approach. But the benefits of organizational specialization of labor that you point out are indeed there: that's why outsourcing is perpetually such the rage in technology.

Stock options (and increasingly, outright grants to employees) are a way of getting that extra emotional involvement from employees, and ownership DOES seem to be a very big motivator to otherwise uninspired rank-and-file workers.

One big frustration of myself and other entrepreneurs in tech that was not, in retrospect, surprising, was that the during the Internet Boom traditional old-boy networking ended up being far more important to funding than one would have thought by reading Wired magazine. It just all seemed more egalitarian because EVERY idiot with any connections to big money was getting funded. Things that had no chance on their face of making a dime were being gushed over and implemented, all because of who somebody's frat brothers were. Such as it ever was.

But I must be a risk junkie, as I was a founding employee of 2 startups before inflicting one on the universe myself, and am still a consultant looking for the next opportunity. And it's a hard habit to kick, as a resume like that makes folks leery to hire you, as they're certain you "won't like to take orders very well", no matter how desperately at times you'd like to just bite your tongue and get a regular paycheck and health insurance again for once.

But at a level of course they are right.

Posted by: David Mercer on May 27, 2003 3:08 PM

Special "Hi" to Friedrich.

In answer to your queries: First of all, I wasn't defending postmodernism from the taint of sadomasochism. Instead, I was defending sadomasochism (which, like most sex acts, is only "deviant" if you don't get into it) from the taint of postmodern radicalism. Most S&M-B&D devotees I know don't strike me as pomo because their experiences haven't been theorized and rarefied right out of existence. There's still a real whip to swing, and a real body to feel it.

As for Plato being or not being a Gnostic, I probably ought to reconsider that one. I tend to think that Gnostics are Platonists and not the other way around, because as far as we can tell Plato got there first, but I'll acknowledge that in terms of their overall world view, Plato and the Gnostics are difficult to tell apart. Still, I tend to think of Plato's dialogues as a bit earthier than Gnostic treatises (I've always had a fondness for Socrates's horse-breeding analogies), which perhaps signals a more fundamental difference in both emphasis and method. But I'm not sure I have the expertise to delve into that difference further.

Posted by: Tim Hulsey on May 27, 2003 5:24 PM

BDSM isn't deviant any longer? Damn. I hate the way everything has been de-devianted. Everything's become much too shameless and healthy. Where does a fan of creepy, shameful, deviant sex turn these days?

Posted by: Michael Blowhard on May 27, 2003 5:29 PM


Posted by: David Mercer on May 27, 2003 5:58 PM


Your theory is not silly at all, but unless you are advocating “extreme outsourcing” (as David Mercer calls it), where everyone is a sole proprietor, (the IRS would have a fit over this!), then maybe its not really your theory. You describe the costs of large organizations, that I think everyone would agree with, but you are ignoring economies of scale and the costs faced by small businesses. I think conventional econ calls this the “theory of the firm” --- why do firms, even small ones, exist at all? Because of lower transaction costs….

So, I may take that back. Your theory is silly to the extent that you are saying that you are better at weighing the costs and benefits of outsourcing, and determining the distribution of firm size, rather than the actual result produced by the market order.

On the other hand, to the extent that the cost of running a small business is artificially driven up by government regulation (and I think it is), this skews the market towards the formation of larger firms, (and something should be done about it!)

In practice, there is always an endless oscillation between doing it in-house and farming it out, both because of fashion and actual experience. When you do a significant amount of outsourcing in a particular area, you tend to focus on the direct costs, and ignore all the expenses that the sub pays, and think, hey, I can do it cheaper. When it is in-house, you realize how lousy a job is being done, how hard it is to keep good employees, etc.

Posted by: Paul Mansour on May 27, 2003 6:18 PM

Lordy, I'm glad I don't run a business. Even though it does sound semi-fascinating sometimes, I'm glad there's still a place in the world for all us half-hearted employee types...

Posted by: Michael Blowhard on May 27, 2003 10:50 PM

Paul, in my opinion, puts his finger right on it!

The costs of regulation to small business can indeed be crippling, I've got a pile of horror stories about that. Definately doesn't help the transaction costs of the smaller fishes.

The "extreme outsourcing" idea has been explored in sci-fi by some authors, I'd have to dig through Amazon to find the best titles (if anyone is interested in that, drop me an email).

Or, who knows, maybe I'll actually do a bit of digging and blog about it. I've gotten burned out on political writing, perchance a bit of culture writing will pick me up!

Posted by: David Mercer on May 28, 2003 12:50 AM


I think focusing on transaction costs misses the point here. I believe the real issue is emotional: most people are not confident that this sort of arrangement could work, or would work for them. If everyone had the necessary belief structure to rationally consider whether to be an employee or a service business owner (a condition that does not obtain today, in my opinion), then I'm sure the market would sort out the proper ratio between these two options. But if people are constrained by their belief system, the market can't work.

There's another, larger truth floating around here, which is that motivation counts for more than efficiency in the business world. Notions of efficiency work fine as long as everyone accurately understands what they are ("to mine coal from this particular vein, the most efficient structure looks like this.") But the fact is, such a complete understanding of economic problems almost never obtains--everyone operates in a condition of uncertainty. And the real point of market based, decentralized systems is that they allow a much more thorough exploration of uncertainty. Perhaps I can't figure out how to solve a certain problem, but some smart sumbitch out there can, and we're all better for it. Or else a dumb sumbitch out there has access to a critical piece of information that I don't have.

So even thought it might seem idiotic to assume that anyone other than Westinghouse or Rolls Royce could compete with GE in building jet engines (a highly profitable business that requires oodles of capital, human and financial), I would bet that lurking under such a mountain of apparent certainty are tons of unanswered questions. I can't figure out how to beat GE at its own game, but I bet a lot of GE employees know ways GE could improve its performance, possibly greatly. The same goes for employees of a local bank, or the corner bakery.

In short, flexibility, which my "service business" system has in spades, will almost always beat an optimized system (i.e., a large corporation)--not because flexible players are more efficient, but because they have (jointly) more information and ingenuity.

Posted by: Friedrich von Blowhard on May 28, 2003 12:57 AM

You're right, emotional issues are important to people. Most of them (especially those with children) are scared to death to work for a startup, let alone start a business or work for themselves.

I've seen this up close and personal at 3 startups, it can make recruiting VERY difficult, especially when you aren't already well financed.

You're also right that people together DO have more information, which is one of the reasons that corporations form, aside from issues of transaction costs and capital concentration.
It's an emotional form of circling the wagons, a type of voluntary collectivism born out of the tribal instinct.

It also aligns self-interest collectively, which makes open cooperation easier. When everyone is effectively a free agent, you're always watching your back for betrayal. There's even a name for it in the consulting industry, the vampire consultant. A sub or co-contractor who intentionally acts as helpful as possible, to make it easier to later steal the client entirely for themselves (and THEIR subcontractors).

Nasty business that, one of the reasons free agents don't cooperate more in hi tech, and why firms win almost all outsourcing jobs.

So in a more altruistic world, you're proposal would work just dandy, but then again so would communism! :-)

And liability issues when something goes wrong are another big disincentive to cooperative free agent agreements, clients want ONE party to sue if things go south, and you don't want several liability for the screw ups of those other contractors you're cooperating with.

It can get ugly, I've seen all of the above more than once in the last 15 years.

Posted by: David Mercer on May 28, 2003 3:44 AM

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