A (functioning) digital society

Society doesn’t work like it used to. But what if, just maybe, it’s better?

Uneasy, anxious, precarious. Whatever word we use to describe our historical moment, I suspect we can agree: things aren’t going well.

In this post I want to mull on why that is. What is it that makes our times feel so dicey? And what distinguishes times like these from halcyon periods in history, like the decades after WWII, that get remembered as golden ages?[1]

A common answer to questions like this would be: ‘it’s the economy, stupid’. People point to broad-based income growth, and the creation of middle-class jobs — or the lack thereof — to explain the public mood.

I think that’s part of the story. But I also think it’s too narrow an answer, especially when status and identity feel so pertinent to the mood of our times.

So I’d like to look through a different lens, more sociological than economic. Specifically, I want to draw on Peter Drucker’s concept of a functioning society, which I think gives a fuller sense of the flavour of pickle we’re in.[2]

My basic argument goes like this:

A digital society offers a novel solution to the puzzle of how society functions. And because this solution differs from the one that was offered by industrialism, we’re in the middle of a dangerous transition.

The new solution is realised through a new institution, the digital platform, and it’s starting to displace the old solution, which was realised through a legacy institution, the modern business corporation. But while this new solution has promise, it hasn’t yet clicked into place.

It’s this in-betweenness that I think helps to explain everything from the rise of status politics to the productivity puzzle, and that gives our times their unnerving, liminal vibe.

These are big claims, so let’s put the kettle on, settle in, and start by defining our terms. What is a functioning society?

A functioning society

Peter Drucker introduced the concept of a functioning society in his 1942 book The Future of Industrial Man. The thing to appreciate upfront is that it’s not intended as a value judgement. A functioning society isn’t necessarily a good society; it’s a formal description, and Drucker had precise criteria in mind.

According to Drucker, a functioning society satisfies two conditions. First, it gives individuals ways to find meaning and fulfilment in their lives. Second, its dominant institution is legitimate and socially beneficial, in that it coordinates people into productive configurations that benefit the group.

We’ll call these the individual and group conditions and we’ll think of them as the two keys that unlock a functioning society. But a functioning society does something more than just meet both conditions; it also has a satisfying unity, offering what Drucker called an ‘integrated’ solution. i.e. a functioning society doesn’t just meet the needs of the individual and the group; it meets both in the same way. The individual condition is met in the way that the group condition is met. People find meaning in life by engaging in institutions that are legitimate and that arrange them into productive configurations.

So the solution we’re looking for isn’t so much two keys as one double key that slides neatly into both locks.

Historical context

To see how we can apply this concept, we need some historical context. Drucker was writing in the early 1940s, so his prompt for this idea was the downfall of European society as manifested in the rise of fascism and the outbreak of WWII.

The war, Drucker felt, was a contest over competing visions of a functioning society. The Nazi vision — a society based on total war and a racist conception of the German volk — was a viable if evil solution. It stood in conflict with the allied vision and, as Drucker was writing in 1942, the outcome was terrifyingly uncertain.

But what was the allied vision? That’s the question Drucker asked in The Future of Industrial Man, and his conclusion was that the allied powers were struggling for an answer. The solution offered by mercantilism had disintegrated with the shift to an industrial society but industrialism had yet to offer a viable solution to what a free and functioning society could look like. Hence the peril of the moment and the urgency of the work to be done.

What happened next? A reductive answer is that, after the allied powers won militarily, an industrial society went on to become a functioning society under Drucker’s definition, hence the post-war golden age vibe. So how did it do that? What was the solution?

Unrealised potential

To see how an industrial society became a functioning society, we need to bring in Drucker’s other object of study: the modern business corporation.

One of Drucker’s main claims in the 1940s and 1950s was that the business corporation had risen to become society’s dominant institution. This built on a literature dating back to the early 1900s, when the corporation — an organised hierarchy run by managers, as distinct from owners — emerged as a new site of power in society, and a novel institutional form.

By the 1940s, Drucker believed that the corporation had become society’s dominant institution, not in the sense that most organisations were corporations but in the sense that it was the organisational form with all the momentum and potential. So if a functioning industrial society was to be achieved, it seemed clear that this would happen through the institution of the corporation.

How far had this progressed in 1942? The short answer is that the corporation had lots of potential, but that this potential wasn’t yet fully realised.

When it came to the individual condition, there was widespread scepticism. Could a life spent climbing the rungs of a corporation offer people meaning and fulfilment? Would people feel crushed by big organisations or would they feel content pursuing a life through those organisations? The jury was out.

Meanwhile, with respect to the group condition, Drucker felt that managerial power was not yet legitimate power, so the corporation’s dominance as an institution wasn’t itself legitimate. The Future of Industrial Man came out shortly after the classic in this genre, James Burnham’s The Managerial Revolution. There was deep suspicion about the separation of management from ownership and the rise of managerial power. This dovetailed with concerns about big organisations, which we tend to forget went far beyond specific concerns about monopoly power.

Still, there was hope. By 1942, the corporation had already shown promise as a way of arranging people into productive configurations. There were standout examples, like the incredible productivity at corporations like General Motors. So in summary, the corporation seemed a bit dubious as a source of fulfilment and it seemed not quite legitimate, but it had lots of potential.

A functioning industrial society

What happened next? In essence, the corporation matured, and was incorporated into a complementary set of social norms and institutions, and thereby began to meet the conditions of a functioning society.

Again, let’s start with the individual condition. Whatever our personal value-judgements — and remember that a functioning society is not necessarily a good society — it’s hard to argue that the corporation became a means by which people found meaning and fulfilment in their lives. This was centred on the concept of a career, which was a novel cultural institution in its own right, based on a mental model of life as a ladder or stairs to be climbed, as people worked their way up a hierarchy.[3]

Rewards for hard work came in the form of promotions, and this fitted nicely into consumer culture; a promotion meant a higher standard of living for your family. And although this was a materialist vision, it went beyond money. Climbing up through a company gave life a narrative and a career conferred status, identity, and esteem. If we think of our mental images of the 1950s and 1960s — the white picket fence, the suburb, the italicised advertising slogans of Madison Avenue — they’re basically the aesthetic manifestation of these routes to meaning. They’re what life was all about.

What about the group condition? The corporation earned legitimacy by proving its value. Management power became legitimate power, and the corporation therefore came to be a legitimate institution, because it delivered the goods.

This potential was being realised as Drucker’s work developed over the 1940s and 1950s, starting with his 1946 study, Concept of the Corporation, a portrait of the emblematic business corporation, General Motors. GM had developed an institutional model — a tripartite mix of central planning/shared standards/functions; decentralisation and autonomy; and market pressures — which proved stunningly effective. This model equipped GM to make the most of the technological frontier of the time, mid-century mass-production. They made cars better than anyone else. The model was then abstracted and diffused across the economy, partly thanks to evangelism from GM boss Alfred Sloan, as a new theory of management.

So by the 1950s and 1960s, we could argue that both of Drucker’s conditions for a functioning society were being met. And, just as importantly, they were being met with an integrated solution. To the extent that individuals found meaning and fulfilment in their lives, they did so by engaging in productive configurations, as workers and consumers, through corporations. And this unity of function — the sheer integratedness of the thing — was the satisfying ‘click!’ as the solution snapped into place.

A functioning digital society

One of the most consequential things happening in the world today is that the digital platform is rising to become society’s dominant institutional form, displacing the modern corporation.

The implications of this shift will take decades to play out, just as they did with the rise of the corporation, and they will range across every domain of our lives, just as they did then. One aspect of this change, profound in its own right, is that the digital platform promises a new solution to how society functions.

The word promises is important here. Because it seems to me that 2022 is a bit like 1942 in the sense that an old solution to how society functions is losing its purchase, and the new solution isn’t yet fully in place. I think the incompleteness of this transition explains why our times feel perilous but also full of potential.

Do we have a functioning digital society? Not yet. But could we, and what could the solution look and feel like?

Let’s start with the individual condition. I think we can imagine how a platform-based society could meet the individual condition, in that platforms provide a social architecture through which people can find meaning and fulfilment. But notice how different this new architecture is to the architecture of the corporation.

In a corporation, people find fulfilment by climbing a hierarchy, which means status is conferred by an authority, hence the need to conform, and life’s narrative arc curves off at the end, in that progress has diminishing returns as promotions level out.

In a digital platform, the social logic is different. Meaning or status are accumulated through recognition in a network, which is non-hierarchical. Status isn’t conferred from above; it accretes from the sides, accumulating in nodes. And the arc of status doesn’t flatten over time, it curves upwards, in the sense that status — and its proxies: Twitter or Instagram followers or Youtube subscribers — compounds. This changes the shape of life and it also changes the incentives people face. It means there’s not pressure to conform but pressure to stand out, or to impress or incite.[4]

What about the group condition? My sense is that, again, we’re at a similar point to 1942. Or maybe (scary thought), a bit before.

What I mean is that the digital platform — like the early 1940s corporation — has huge potential, but this potential isn’t yet fully realised, or is realised unevenly, and feels sketchy or illegitimate.

Is the digital platform a legitimate institution today? Basically, no, right? Whatever you think of the bro-ocracy of Zuckerbeg, Bezos, and Musk, I’m not sure anyone could credibly claim that their power is legitimate. I guess at a stretch you could say that within the narrow domain of business their power is earned. But clearly the bros’ power goes far beyond business, into politics and deep into our lives, in a way that feels manifestly not OK.

Still, you can see how the digital platform might yet accumulate legitimacy via the same grudging pragmatism by which managerial capitalism earned legitimacy, especially if we can also improve how platforms are governed.

Certainly we’ve seen examples of how digital platforms can coordinate people and resources into productive configurations that are unprecedentedly effective. In just two decades, digital platforms have done things like make all of human knowledge available to billions of people instantly for free, put billions of humans in near-instant contact with billions of other humans, made all art and music available to almost everyone very cheaply, and matched people to things they want, like places to stay or taxis or partners, in a way that makes twentieth century markets look like a fumbling Politburo. i.e. platforms are really good at what they do; they deliver the goods.

And of course the logic by which platforms do all of this — the way they arrange people and capital — is wholly different to the logic of the corporation. The tired but true example is Airbnb, the biggest hotel chain in the world, which owns no hotels, but just puts people who want a room in touch with people with rooms to use. Or Uber, which likewise taxis.

So the digital platform offers a novel solution to both the individual condition and to the group condition. And remember the all-important test: we’re looking for an integrated solution, and the platform seems to provide one.

Look at Wikipedia as an emblematic example. It’s a coordinating mechanism of near magical effectiveness, prompting the creation, almost for free, of the most comprehensive ever store of human knowledge. And Wikipedia achieves this coordination — i.e. it meets the group condition — by giving people routes to purpose in their lives; they get satisfaction from writing and editing articles — i.e. by meeting the individual condition. People find meaning by engaging in a productive configuration. And likewise with platforms like YouTube, Instagram, and Twitter.

So I think we can see how the platform could, in time, come to meet the two conditions of a functioning society. And that it could do so with an integrated solution that is different to the corporation-based solution under industrialism.

Society would work, but it would work in a way it’s never worked before. And, dare I say it, maybe it will work, you know, better?

Is this something better?

Lately I keep reading books about how dreadful things are thanks to digital capitalism. Two examples are McKenzie Wark’s Capital is Dead: Is this something worse? and Shoshana Zuboff’s The Age of Surveillance Capitalism. They’re both wonderful books but both are also screams of angst into the digital void, and I can’t help but feel there might be space for some optimism.

In my book, End State, I argue for a kind of conditional optimism; a digital society has the potential to be better than an industrial society if we can assemble the right institutional arrangements.

In this post, I guess I’ve made a more formal version of the same claim, through the lens of a functioning society. I know this sounds like a stretch, given everything going on in the world, but I want to stand by the claim that a digital society has more potential than an industrial society.

Take the individual condition, concerning our routes to meaning in life. It feels at least plausible that digital platforms could offer a more promising architecture of fulfilment. Or more promising, anyway, than the corporation.

Just think back to those concerns about the soul-crushing implications of big organisations, the sharpest cultural expression of which was that wonderful moment in The Graduate when Dustin Hoffman is collared at the drinks party.

I just want to say one word to you. Just one word.
Yes, sir.
Are you listening?
Yes, I am.
Plastics.
Exactly how do you mean?
There’s a great future in plastics. Think about it. Will you think about it?

And then, later, Benjamin’s panicked banging on the glass and the young couple’s liberating escape on the bus.[5]

The corporation’s routes to meaning came with a condition: conform to the hierarchy. Be a cog in the machine. So might platforms offer routes to fulfilment that are freer, and ultimately more human?[6]

And then there’s the group condition, the way platforms coordinate people into productive configurations. Whatever people say about Uber, it’s hard to deny it’s a more effective coordinating mechanism for taxis than anything we’ve devised before. As I write in End State, the problem isn’t Uber, the problem is Uber-ungoverned. A well-governed Uber — Uber working within an internet-era institutional settlement — would be a Pareto improvement on the previous configuration.

So could we allow ourselves a moment of hope? Could platform capitalism, or whatever we call this new thing, be not worse but better than what came before, if we get it right?

Wrapping up

Let’s wrap up and see if I can justify the length of this post. I think the concept of a functioning society illuminates our social predicament in three main ways.

First, I think it helps to clarify what’s meant by the important but vague claim that a digital society ‘works to a different logic’ to an industrial society. This is true in the sense that a digital society offers a new solution to the question: how does society function?

Second, I think this account helps us understand our social predicament in a way that’s fuller and more powerfully explanatory than a narrowly economic story. It fits, for example, the way people seem to be struggling to find meaning and fulfilment, resulting in a crisis of status. And it fits the sense that old routes to esteem/identity/meaning — specifically the pride people draw from a career — seem to have closed off, and that new routes are only half-open and exclusive. And it also explains that sense of potent, dangerous social energy, as people who are hungry for meaning, and dissatisfied by life’s narrative arc, go looking for other routes, outside of society’s productive institutions.

Meanwhile it also seems to fit contemporary concerns about the illegitimacy of our newly dominant institution — the platform — and the social function it has started to play, just as in the early 1900s we were worried about the illegitimacy of the corporation and managerial power. It also fits the way the productive potential of the platform is being realised but only unevenly and haphazardly, so that average wages/productivity are stalling even while there are pockets of explosive wealth and productivity.

Third, I think this story gives us a reason to hope — which aside from being right, is just nice, isn’t it? But at the same time I think it also shows what’s at stake, just as Drucker intended in 1942. After all, as I watch images of tanks rolling through Ukraine, I can’t help but think back to Drucker’s original motivation: there was a war on, and he saw the war as a fight between different conceptions of a functioning society. So is it a stretch to see today’s war — both its hot manifestation vs. Russia in Ukraine and its colder manifestation, in the standoff between the west and China — as a new battle between visions of a functioning society?

As Drucker put it 80 years ago, “a society cannot function unless it gives the individual member social status and function, and unless its socially decisive power is legitimate power.”

So maybe that’s a good way to frame the task we face today: we need to build a functioning digital society.

This post is part of a year-long series on how we govern the future. To read along, follow me on Medium here or support the project for £3 a month on Substack. For the big story behind all this, the paperback of End State is out now.

Footnotes

1. Obviously the idea of the 1950s and 1960s as a golden age is problematic. But as we’ll see later in the post, I’m not talking about a ‘good society’ as a value judgement; I’m talking about the formal way in which society functions. I don’t think it’s too much of a stretch to say that the goldenness of an age owes something to this sense of formal coherence.
2. Just to fess up that I’m going to stray pretty far from what Drucker was originally claiming, so this all comes with apologies to the Drucker purists. I’m using his work as a jumping off point rather than adhering to his views.
3. Remember that ‘corporation’ here doesn’t refer just to private companies but to the broader idea of the corporation as an organisational form. I include in this definition other institutions that took on that form, such as government departments. Lots of people found meaning by working their way up through the civil service, for example, and this functioned in broadly the same way as a career climbing up through a big private company.
4. Some useful life advice falls out of this too: if you’re still playing the old game, climbing a hierarchy, you should get out and into the new game, building status in a network. This is a more general version of Nassim Taleb’s advice to get into a zero marginal cost career.
5. Weird fact: as I wrote this paragraph, the cafe I was working in started to play Simon and Garfunkel — ‘Hello darkness my old friend…’ — which felt oddly like fate blessing my argument.
6. One really important side note here (which you might reasonably argue is more than a side note) is that these platforms are privately-run systems of control that are calibrated for profit, as Zuboff argues so vehemently in The Age of Surveillance Capitalism. The essence of my view is that this is true, if overstated, but that all is not lost; i.e. with the right institutions we can harness platforms for public good. But this is a debate of real complexity in its own right, so I’ll unpack it more another day.