The Avenues Of Exodus – Part 2 Of 2

 

“Following her immutable law, nature, having changed the form of competition, proceeded to select a quality of mind to correspond with the new conditions of life.” – Brooks Adams, The Law Of Civilization And Decay

Nature Abhors A Vacuum

The end of a monopoly leaves a void that must be filled. (See: Part 1)

Some assume the fourth monopoly will end with an economic collapse – returning large parts of the world to the second monopoly. Though some are quick to paint members of the prepper movement as kooks, their strategy could serve as a strong hedge against such a scenario.

Fate may intervene. Some politicians, already supporting a return to violence, have found themselves face to face with a serious problem; War is a tough sell in the age of the Internet.

The first monopoly is under siege, and its walls are beginning to show signs of strain. Alternative media, social networks, and online activism have altered the course of public discussion, making the societal consensus necessary for military action difficult to obtain. (See: Alternative Media – Piranhas Loose In The Shark Tank)

The Battlefield Of Information

The one-sided fight of decades past, where six corporations controlled almost everything, is giving way to an open playing field of information warfare.

The rise of big data as a competitive industry is an attempt to regain the upper hand. The much-talked-about NSA blanket surveillance programs were created not just to farm data, but to use advanced analytics to extract and store various metadata for future reference.

Despite the massive advantages envisioned by the proponents of these programs, western Intelligence communities managed to find themselves completely shocked by the Arab Spring. Yet, almost any teenager with a Facebook page could have told you something was about to happen.

Even members of the Council For Foreign Relations have criticized this as an utter failure of imagination. (See: The Ten Biggest American Intelligence Failures)

“It’s not what you look at that matters, it’s what you see.” – Henry David Thoreau

The vast gap in perception seems to be split by two paradigms – those who think in lateral terms, and those who think hierarchal terms. It’s the kind of shift that may render much of the traditional intelligence complex obsolete.

CIA Director Walter Bedell Smith once concluded that any sufficiently educated segment of the public can derive most classified secrets from publicly available sources. (See: Intelligence – The Architecture Of Secrets)

In recent years, the quality of Open Source Intelligence (OSINT) has become a strong rival for institutional sources. In some cases, it has surpassed it. This is the result of knowledge leaving the old institutions by a very low-cost path: The Internet

It’s a path that could end more than one monopoly…

Resistance Is Anything But Futile

The laws of nature can be quite poetic from the right perspective, revealing a deeper structure beneath outward appearances.

Picture, in your mind, the shape of:

•A bolt of lightning, cutting through the air.
•A river weaving its way down a mountain, on its way to the ocean.
•Blood vessels, leaving the heart, and spreading throughout the body.
•The crack in a cinder block – split by a sledgehammer.

All four share a similar branching shape, because energy is most efficiently channeled through a path of least resistance.

It doesn’t matter whether it’s lightning through air, force through cinder block, water through rock and soil, or blood through its vessels; Nature has a way of finding simple answers to complex problems.

George Zipf extended the application of this principle in his classic work, Human Behavior And The Principle Of Least Effort. Even today, Zipf’s Law continues to find applications in an incredible range of fields, from linguistic studies to Google’s search algorithms (See: Zipf’s Law And The Internet).

If any medium is studied thoroughly enough, or designed well enough, the path can become quite predictable; This is why buildings have lightning rods.

Capital and labor are forms of energy, and they, too, pass through a medium – society.

The Shifting Centers Of Capital

“Although nature never precisely repeats herself, she operates on the human mind according to immutable laws; It should be possible by comparing a living civilization with a dead, to estimate in some degree the course which has been run.” – Brooks Adams, The Law Of Civilization And Decay

In the early 14th century, Florence became the center of international trade in Europe, home to the first international banking system. Dynasties such as the House Of Medici owed their success to several innovations:

•Counterfeit-resistant bills of exchange.
•A double-entry ledger system for tracking and error-checking.
•A universal clearing house to quickly resolve payments.

For the first time in world history, a financial system had achieved a wide area of circulation, consistent assayal of standard coinage, and established itself as a trusted third party for its intermediaries.

Ironically, what makes CryptoCurrency such a powerful threat to the fourth monopoly is its ability to improve and/or replace each of these features by means of a decentralized protocol.

The city’s rise as a capital center was an important historical crossroads, but hardly a unique one; It formed only one link in a lengthy chain.

Though he could not fully explain why, Brooks noted that capital centers – accumulated wealth in the hands of a few inter-related families and their business interests – migrate over time.

For thousands of years, capital has been forming in centers, and fleeing them – almost always moving westward.

In Chronological Order:

Sumeria -> Egypt -> Greece -> Italy -> Germany -> Paris -> London -> New York

One of Brooks’ last predictions – from America’s Economic Supremacy (1900) was that New York City was next in line, and would emerge as the center of world trade by the end of the 20th Century. He was right.

The essence of his theory was that each nation and institution creates an ever-growing number of policies, procedures, and laws over time. These measures create internal resistance, stifling competition to keep the current owners and rulers in power. This works, until that resistance reaches a point where it is almost impossible to pose a challenge to the status quo.

This creates huge incentives for capital and labor to flee the system – seeking out a path of less resistance. As a result of this exodus, a new capital center is born. Typically, its predecessor will try to retain its dominant position by going to war with its successor. This often occurs over several generations and multiple conflicts.

Knowing this, look at the list again. Do you notice a pattern?

The Next Challenger

Of course, there is no reason to think that this trend would end with New York.

An intriguing interpretation was offered by Balaji Srinivasan of Andreessen Horowitz in his speech (highly recommended) at Startup School 2013.

In Summary:

Silicon Valley began to emerge as a center of innovation in the eighties, challenging the existing power centers in the fields of:

Finance & Publishing (New York City) – First and Fourth Monopoly
Higher Education (Boston) – First Monopoly
Entertainment (Los Angeles) – First Monopoly
Law & Regulation (Washington, D.C.) Fourth Monopoly

Like other historical monopoly holders, these power centers have attempted to tighten down with measures to squelch competition; Predictably, this drives innovation and capital outwards.

He cites the mechanics of Hirschmann’s Exit, Voice, and Loyalty:

Exit – Leaving an organization in protest.
Voice – Staying and vocalizing one’s concerns.
Loyalty – Remaining supportive of the existing system (though perhaps acknowledging its shortcomings).

In short, the model agrees with Brooks’ conclusions – institutionalized problems create incentives to Exit; An important consideration to add is that Voice increases the power of Exit and vice versa.

So far, both strategies have proven effective; Institutional counter-efforts have only moderately reduced the rate of escape.

What If The Next Center Of Capital, Isn’t A Center At All?

Unlike its predecessors, Silicon Valley’s emergence comes under a distinctly different set of circumstances. The availability of wide ranging, inexpensive communications and near-zero-cost collaboration makes it far more distributed than its predecessors.

Resulting from its basis in technology, the culture and influence of Silicon Valley will always exist widely outside of its physical location (See: The Rise Of Emergent Networks).

The historical precedent – the old center of capital picks a fight with the new one – may not even be possible, let alone feasible. Taking on the whole Internet really isn’t an option.

Over time, capital and labor that exit into a decentralized, digital economy will become very unlikely to return the way they came.

This process will certainly run into obstacles, but the end result appears to be inevitable. The changes will be profound, but the world has seen many of them before. (See: Digital Currency – Money’s Future May Lie In Its Past)

Great challenges bring great opportunities.

In sincere thanks to Mr. Adams for his work, I’ll give him the last word:

“The cheaper organism exterminated the more costly, because energy operated through money strongly enough to cause free economic competition; Nor is the evidence upon which this conclusion rests to be drawn from books alone. Coinage and architecture, sculpture and painting, tell the tale with equal precision.” – Brooks Adams, The Law of Civilization And Decay


 
 
  1. Tom 03/09/2014, 10:39 PM Reply

    Outstanding article. Pulls together so many threads I have been exploring in realms of imagination and consciousness the last few years. I have not read most of your references, so I have some catching up to do here, but am very excited by your trains of thought. Keep up the great work. Some coin is certainly due, and will shortly be tendered.

 
 

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