The Rise And Rise Of Networks

In anticipation of this year’s St. Gallen Symposium, I re-watched historian Niall Ferguson’s keynote from last year on hierarchies and networks. As he explained, history is a process driven by the interaction between hierarchies and networks. “The key to understanding the world today,” he began in his keynote, “is between understanding your networks and my hierarchies.” His lecture offered a compelling understanding of how the world has worked and is probably going to work in the future. But what are networks and hierarchies?

Networks are “spontaneously self-organizing, horizontal structures.” For example, networks are created whenever we engage in new forms of information technology. In the past the telephone and telegraph created networks. Today new networks arise from startups that have already become household names: Facebook, Google and Twitter. Conversely, hierarchies are “vertical organizations characterized by centralized and top-down command, control, and communication.” Amongst the most powerful hierarchies are states, bureaucracies, universities, churches and empires.

The relationship between networks and hierarchies is interesting because the relationship governs the rate of innovation. Ferguson showed that innovation arises disproportionally from networks and hierarchies extract rents from those networks. In other words, of the two networks are the one that propel our society forward. Therefore, if you ask any unprivileged individual that wasn’t born into any hierarchy, which of the two he will prefer, he will tell you networks. A world that empowers the individual is a world that will have more innovation.

Since hierarchies have the power to limit the growth of network, they also have the power to regulate the level of innovation. For example, during the Cold War, the United States and Soviet Union were able to control network technologies.

As I reflected on Ferguson’s lecture and his historical expertise, I asked myself what the rise of network would mean for millennials. “The networks temporarily gain the upper hand,” explained Ferguson, “when they are at their most innovative.” It made me optimistic that over the next 25 years, the rise of networks will probably positively empower the individual.

Since we are what seems living through only the early stages of this new network revolution, this should be an opportunity to unleash your entrepreneurial spirit, and not subordinate to a hierarchy. In a world of rising networks, innovation will not just come from expected sources, but can literally happen anywhere.

A world that will have more innovation is desperately needed. We need to actively work against allowing hierarchies to extract resources from those creative networks. In order to solve some of the world’s pressing problems, we need innovation. But if hierarchies are going to dominate networks, the rate of innovation will not be fast enough.

We live in an exponential world. The rate of our problems, and the rate of innovation is exploding, but our problems cannot be solved if hierarchies will continue. We need to empower the individual.

As Ferguson explained, the networks temporarily gain the upper hand when they are at their most innovative. I think and hope that they are not yet at their most innovative and what that then means is that you should go work for a network. Lets hope that this stays for a while.

To some extent, hierarchies and networks need each other. For example, the network revolution that were are now undergoing, an important impetus was giving by hierarchies at the beginning of its revolution.

We just need to make sure that hierarchies don’t get too greedy, and curtail the growth of networks in such a way that networks lose their creative juice. It is unlikely that networks will ever triumph completely over hierarchies, but at least for now it is certain that networks are on the rise, and this has important implications for millennials. No longer do we live in a world where the individual has to subordinate itself to the state. Finally the networks allow individuals to be sovereign.