Things Fall Apart

Originally written — 1/19/16

“Things fall apart, the center cannot hold”, wrote Yeats in 1919, as the modern world struggled to come to grips with the new political, economic and social realities that emerged in the aftermath of the First World War. While he spoke of a markedly different time, Yeats’ words hold a surprising resonance in today’s context as American society experiences an unprecedented phenomenon across all three domains — a literal unraveling of traditional “centers”. From newspapers to large corporations to social media, the trend of separating a whole into its many parts (often termed “disintermediation”) is remains critically under-examined as a driver of many of the key fault lines in American society today. For both established actors and emerging ones, from startups to social revolutionaries, it may also hold the key to survival.

The most immediate and obvious effects of the loss of various centers is in the political realm. As Donald Trump has shot to the front of the Republican primary, his innovative use of social media and deft media manipulation in lieu of traditional advertising has brought this topic to the fore. Because he can reach his most dedicated supporters directly through Twitter, Trump has no need for the gatekeepers of traditional media, who only cloud his message if anything. As a result, the Republican party architecture, geared to dominate the traditional audience bottlenecks, has been left flailing. Furthermore, in an increasingly atomized world, where no one organization has the power to set rules, political rhetoric has escalated from attack ads to borderline hate speech, as Trump calls for the broad deportation of illegal immigrants and a ban on Muslim immigration.

Just as disintermediation has empowered Trump, it has also quietly cleared the way for candidates such as Bernie Sanders to gain a far greater foothold than any of their predecessors. Driven almost entirely by a digital grassroots campaign, Sanders has set individual donation records by appealing directly to the cause groups most closely aligned with his views at the extreme end of the American left.

While the loss of traditional gatekeepers may in some sense usher in a more democratic political arena, it also creates a more polarized one. With the ability to directly identify and target increasingly narrow, partisan audiences, candidates have less incentive to develop broad coalitions or even engage in meaningful debate. If the crowded Republican debates, full of candidates, sound and fury, are any indication, this is a dark future for American politics.

From a societal perspective, disintermediation has had a similarly dual effect of being both liberating and polarizing. Most prominently, Facebook video has brought the ongoing epidemic of police violence against black Americans into every home in the country. What was once discussed in isolated communities, through more traditional intermediaries, whether civil rights activists, the black blogosphere or even hip-hop itself, can now directly reach every American. The result of this heightened awareness has been the emergence of a new civil rights movement, developed almost entirely online.

Black Lives Matter has displayed a sudden and growing influence across various facets of American life. From the ousting of the University of Missouri president to various protests shutting down major parts of U.S. cities, the movement has inspired and empowered individual actors to come together on and offline. Forcing policy shifts by both Hilary Clinton and Bernie Sanders, and even Republicans like Rand Paul, is a tremendous achievement for a movement often derided as “slacktivism”.

However, the emergence of large online communities, and new specialized media outlets, has led to a highly curated online experience. Rather than engaging in dialogue with our diverse set of worldviews, we tend to see posts and content produced by those most closely aligned with our worldview, which we reward and reinforce through likes, comments and forwards. The balkanization of online communities in this manner leads to echo chambers, which were most visibly called into question when the Republican party was largely blindsided by the loss of Mitt Romney in 2012.

Thus, as online social interaction continues to grow, technology will increasingly allow social movements to directly appeal to likely adherents, and potential gain legitimacy amongst less-aware populations. However, increasing balkanization of the internet will likely further entrench opponents, who are less likely to come in contact with views counter to their own.

Finally, from an economic perspective, disintermediation has come in multiple forms that are fundamentally challenging the definition of the American worker in the modern era.Software companies like Uber and Instacart have facilitated the rise of part-time work, contracted directly between the employer and employee. As has been well documented, the rise of the gig economy has not been accompanied by social structures to support workers who are now independent contractors. As more contractors join these platforms, many workers are finding themselves working the same number of hours as previous occupations, but without the benefits of more reliable hours and income, or a unified voice to negotiate with their employers. The same trend is evident outside the gig economy, as falling union participation and broader attacks on organized labor have increasingly left the American worker to fend for himself.

It is in the economic realm that the implications of disintermediation may be most immediate and apparent. In a world where individual employees are increasingly isolated and have less leverage, the burden ultimately falls upon government to cover the gaps to help Americans meet basic standards of living. The fight for a living wage in stores like Walmart and McDonalds has exposed this dependency, as full-time employees remain dependent on government food aid to feed their families. As workers shift to more contract work, we should expect to see the offloading of personnel costs continuing to be offloaded to government from corporate balance sheets. Already, the introduction of measures like Obamacare have helped workers who participate in the gig economy by providing them a healthcare safety net, regardless of their employer’s benefits package.

So, what are the broader, long-term implications of this shift, across our politics, society and economy? We should expect to see a more polarized electorate, fiercely devoted to its causes, that is increasingly dependent on the federal government. Ironically, states voting Republican in national elections have repeatedly been shown to draw more federal money than Democratic states. While the party’s ideological opposition to large government will likely be unchanged, declining manufacturing and ongoing economic woes across the middle and south of the country should at least bring this position into question. Furthermore, the broader demographic shift to a majority-minority country, particularly with a large Hispanic population with significant numbers of immigrants, provides a constructive outlook for Democrats. And once policies are put in place, politicians face stiff opposition to their removal, meaning new aid programs should have reasonable permanence.

From economic perspective, this would result in higher government spending, and improved corporate balance sheets, as corporate personnel costs fall. From a technology perspective, it also could provide support to momentum-based investing, as the stakes increasing become winner-take-all, as companies fight for employees or customers in a disaggregated marketplace. Given that these companies rely on economies of scale and benefit from significant private funding, expect early leaders to aggressively seek to claim new market share.

Most uncertain is the effect of disaggregation on our society. In one sense, an individual, atomized society goes back to many of America’s core values and myths — from the frontier explorer to the lone cowboy. Yet, as Lincoln himself noted, “a house divided cannot stand”. As we retreat into the comfort and seclusion of the familiar, we also risk threatening the foundational, communal spirit of our society. Many of America’s pivotal moments have depended on communal cooperation, from the Thirteen Colonies rising up to defend individual freedom and liberty, to the Freedom Riders drawing on Americans from all walks of life to confront prejudice. The forces drawing us apart may be too strong, and ripple effects could shake the foundations of both politics and our economy. Only time, and our choices, will tell.