Frontier logic

End State: Blog 1/52

Last week I announced a new project — a weekly blog to explore how we govern the future.

The idea is to see if, over the course of 2022, we can get closer to answering the question:

What institutional settlement will we need to make a success of 21st century digital capitalism?

Before we can build an answer, we’ll need some fairly deep intellectual foundations. So for the first few weeks I’ll focus mostly on this.

In this first post I thought it would be useful to surface an idea that will come up a lot over the course of the year.

This is the idea that, if we’re going to develop an institutional settlement fit for a digital economy, the first thing we need to do is understand the most advanced practice of production, and then work back from there.

To put this another way, we need to spend far more time than we do today (in public policy at least) really getting under the skin of the way things are being done at the frontier of technological change.

Our ideas then need to be tested against this understanding, rather than being tested against the economy as it is on average today. i.e. we need to spend less time asking ‘how would this idea fare in our economy as it is now?’ and more time asking ‘how would this idea fare under the archetypical conditions of digital capitalism?’

This is a slightly nuanced point, so I’ll unpack it more in the coming weeks. But for now I just want to establish the basics and to call out some interesting implications.

A stylised map or schematic of the Ford complex at River Rouge in Michigan.
Ford at River Rouge, the home of mass production

Determining the metabolism

On the face of it, the idea of basing our public policy debate on the logic that holds at the frontier of technology might sound strange.

After all, even in 2022, truly digital markets or digitally native companies/tech startups are still the exception rather than the rule.

And, in line with this, in public policy, we tend to treat ‘technology policy’ as a kind of niche subset — a set of emerging issues that are best dealt with by specialist policy teams.

Even when it comes to describing the economy, we often talk about the ‘technology sector’ as if technology is a vertical specialism, a bit like the ‘automotive sector’ or the ‘housing sector’.

To see why this is a dangerous way to think during a technological revolution, it’s helpful to go back to the defining historical moment of technological change, the Industrial Revolution.

One of my favourite books about the Industrial Revolution is The Unbound Prometheus by David Landes. The book has its critics but it would be hard to write a more vivid account of the moment of ignition — the point at which industrial capitalism caught light, starting a self-sustaining process of innovation and growth.

What comes through so clearly in Landes’s account is the shape of technological change.

He shows that the process of industrialisation wasn’t in any way even or uniform, like a pan of water heating up on a stove.

Instead, it was a process of replacement. A wholly new type of economy emerged, at first on a tiny scale in certain locations. Then, like a virus (sorry, the metaphor is hard to resist) this new type of economy spread as it replaced, piece-by-piece, the previously dominant logic.

As a result, even though the full process of replacement/deployment/diffusion took many generations to play out, the significance of the change that was underway — and the inevitability of that change — was baked in from early on.

Landes makes this point best when he argues that the British economy of 1851 was profoundly different to the economy of 1801 despite, on the face of it, looking really quite similar.

In occupational data, for example, Landes acknowledges that “the British economy of 1851 may not seem very different from that of 1801”.

But because a new model of production had emerged (with patient zero having been Richard Arkwright’s factory on the bank of the River Derwent), this headline data failed to capture the most salient fact about the economy at the time.

As Landes puts it:

“These numbers merely describe the surface of the society. […]. Beneath this surface, the vital organs were transformed.”

The new model that had emerged was of course the factory system. And although this new system was still in the minority of economic activity in 1851, it had already proven its earth-changing potential (a potential that lay (and this is another point we’ll come back to in future posts) not in the machines themselves, but in the way the machines were being used)).

And so, as Landes says, it was all but irrelevant that most of the economy hadn’t yet adopted the new system; this was just a matter of time.

What mattered was that the industrial factory had shown itself to be so dramatically superior as a way of exploiting the frontier of technology that its eventual dominance was assured.

As Landes writes of industrial factories:

“Though they weighed but a fraction of the total, whether measured by people or wealth, it was they that determined the metabolism of the entire system.”

Promising and mindful

So a new practice of production emerges and becomes dominant or decisive long before it’s statistically in the majority. And this idea also applies pretty well to the technological revolution we’re living through now.

In fact, we see almost precisely this point being made in contemporary writing about digital transformation.

In his book, The Knowledge Economy, for example, Roberto Unger writes about what he calls ‘the vanguard’ of economic production. Unger is referring to the most advanced practice of production at work in the world today, with its archetypal form being the digital platforms and tech startups of Silicon Valley.

Unger’s point is Landes’s point: it doesn’t matter that this new practice of production — and all the behaviours and dynamics that come with it — is still, statistically speaking, a niche. It nonetheless sets the dominant logic of our times.

Peter Drucker made the same point in the 1940s, writing about his generation’s technological revolution: the economy-wide diffusion of assembly line mass-production. He warns his contemporaries that they often underplay this shift because they rely on a purely quantitative assessment, which doesn’t capture the all-important qualitative change. The key question isn’t about stocks or averages but about flows and momentum.

“The new mass production system carries all the technological and economic momentum; it is the dynamic force in our techno-economic engine.”

And you could of course write precisely the same sentence today, subbing in the digital platform.

So how can something be both niche and dominant? Unger gives a couple of reasons, both of which would apply just as well to Arkwright’s factory in the 1770s, as they would to Ford’s River Rouge complex in the 1930s, or to the Googleplex in the 2020s.

First, he argues that the digital vanguard defines today’s dominant logic because it has shown itself to have such explosive potential. Or, to use Unger’s words, it’s the most “promising” practice of production and the one that “most fully reveals our powers”.

Sure, people are still ironing out the details, and, sure, lots of tech companies still fail, just as many of the earliest factory bosses ended up dying impoverished and in debt (although not, to be fair, Arkwright himself).

But the promise is there, so each time someone gets the implementation of a new digital disruption right we see 100X improvements and industry-upending disruption.

And so as startups try to apply digital methods, industry-by-industry, it’s a bit like they’re sitting there throwing tennis balls at landmines. Sooner or later they’ll hit, and the old way of doing things in that industry will go boom.

The second point Unger makes, which I find more interesting, is that the frontier of production is also the most intentional part of the economy. In other words, it’s the part of the economy in which people are thinking through how to do things in a really conscious way. Unger uses the word “mindful” to capture this point.

In digitally-native organisations, people are asking: how should I operate in order to get the most out of the technological capabilities that are available now?[1] And, because they ask this question from the start, it guides everything from how these organisations are structured to how they conceptualise their work and make decisions.

Put another way, at the frontier of technological change, there’s less inherited practice; people don’t just do things the way they’ve always been done. And of course it’s precisely this intentionality that explains the high potential. Because at the frontier, the question people are asking is: what’s possible now?

Where does this leave us?

We’ve drifted quite far away from the question of policy/institutional settlements. So to bring this in to land, let’s touch on what this means for our political/institutional response.

If we see a technological revolution as the piece-by-piece replacement of an old economy by a new one — and, crucially, one that is qualitatively / incommensurably different from the old one then this shapes how change will feel and it determines how change should be navigated.

It means, for example, that at any point in time, there will be a huge gap (and, on the upswing of a technological revolution, a growing gap) between the way things are done at the frontier of technological change and the way things are done in what we might call the legacy economy.

We see this today in the way that a growing number of organisations (but still a statistical minority) are fully ‘of’ the 21st century even while most organisations — including all the ones founded before about 2000 — still look functionally, structurally, and culturally pretty much like they would have done 50 years ago, despite lots of effort.

This gives rise to huge inequalities of experience, and not just in terms of money but also in terms of mindset and culture. We end up with different parts of society living in wholly different mental and physical environments. And the fractures between these environments run along a web of intersecting lines, sometimes of geography (dividing cities from rural areas) and sometimes of age (making families argue at Christmas).

On the upside, however, there’s also a more magical consequence of this way of thinking about technological change: in a sense, it means we can see into the future.

It’s hard to put this better than science fiction writer William Gibson when he wrote:

“The future is already here — it’s just not very evenly distributed.“

By looking at the most advanced practice of production today, we can see what the future, on our current path, is going to look like.

To avoid this becoming too deterministic, I like to think about this less as a forecast of the future and more as a premonition, a bit like the one used by Charles Dickens in A Christmas Carol. The Ghost of Christmas Yet to Come doesn’t give Ebenezer Scrooge a glimpse of the future in order to make him feel doomed. The ghost is there to give him a chance of redemption.

In a similar way, when we glimpse the society/economy of the future in the queasy vibe and inequities of the Bay Area, it tells us where we’re headed if we don’t change course.

And all of this takes us back to where we started: to the question of how we should go about building a state for the 21st century.

If we want to design a new institutional settlement, the starting point must be to focus obsessively on understanding the nature of production at the frontier of technological change. The main question we need to ask is: What is it like out there?

More specifically, we need to ask questions like: What is the dominant organisational form in digitally native organisations? What economic logic seems to apply in digital markets? And how would today’s orthodoxy — the collection of unspoken premises on which we base our debates about policy — fair in this kind of environment?

These questions should be central to the way we debate and develop laws and institutions in the early 21st century; we can’t afford for them to be niche. They should guide everything from the skills and interests we expect from the people who work in public policy and who lead us, to the analytical and systems-change work of redesigning our institutional settlement.

Anyway, there’ll be more on all this in coming weeks. For now, if you find any of the above interesting, you can follow me for free here. Or be lovely and support the project by joining the £3 a month club on Substack.[2]

If you’d like to read the big (and I promise optimistic) story that sits behind all of this, you can find it in my book, End State: 9 ways society is broken — and how we can fix it.

Footnotes

  1. Ok, so people who work in start-ups don’t tend to make this explicit, and they rarely work it out fresh each time. They often just emulate the way things are done at similar organisations, or they apply whatever is emerging as the new consensus about how things should be done. But the point is that these approaches are themselves still quite intentional/recently developed as ways of making the most of technology. (Also, the process by which this new way of doing things is abstracted from individual settings and then codified and spread across an economy/society is itself really interesting, and will be something we’ll talk about more.)
  2. Annoyingly, Substack sets a minimum monthly price of $5 so I’ve set a 20% discount which works out at $4 (just under £3).

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