(2011-06-10) Rao History Of Corporation

Venkatesh Rao gives a brief history of the Corporation.

Key books:

• The Corporation That Changed The World by NickRobins, a history of the East India Company, a rather unique original prototype of the idea
• Monsoon by Robert Kaplan, an examination of the re-emergence of the Indian Ocean as the primary theater of global geopolitics in the 21st century
• The Influence of Sea Power Upon History: 1660-1783 by Alfred Thayer Mahan, a classic examination of how naval power is the most critical link between political, cultural, military and business forces.
• The Post American World by Fareed Zakaria, an examination of the structure of the world being created, not by the decline of America, but by the “rise of the rest.”
• The LeverOfRiches by Joel Mokyr, probably the most compelling model and account of how technological change drives the evolution of civilizations, through monotonic, path-dependent accumulation of changes

This gives us a useful 3-phase model of the history of the corporation: the Mercantilist/Adam Smith-ian era from 1600-1800, the Industr Ial/Joseph Schumpeter-ian era from 1800 – 2000 and finally, the era we are entering, which I will dub the Information/Ronald Coase-an era.

But the Mercantilist model was already sharply declining by 1800. Something else was happening, and Fareed Zakaria, as far as I know, is the only major commentator to read this sort of table correctly, in The Post American World. He notes that what matters is not absolute totals, but per-capita productivity. We get a much clearer picture of the real standing of countries if we consider economic growth and GDP per capita. Western Europe GDP per capita was higher than that of both China and India by 1500; by 1600 it was 50% higher than China’s. From there, the gap kept growing. Between 1350 and 1950 — six hundred years — GDP per capita remained roughly constant in India and China (hovering around $600 for China and $550 for India). In the same period, Western European GDP per capita went from $662 to $4,594, a 594 percent increase.

If the EIC (East India Company) was the archetype of the Mercantilist era, the Pennsylvania Railroad company was probably the best archetype for the Schumpeterian corporation. Modern corporate management as well Soviet forms of statist governance can be traced back to it. In many ways the railroads solved a vastly speeded up version of the problem solved by the EIC: complex coordination across a large area. Unlike the EIC though, the railroads were built around the Tele Graph, rather than Postal Mail, as the communication system. The difference was like the difference between the nervous systems of invertebrates and vertebrates.

The Schumpeterian corporation did to business what the doctrine of Blitz Krieg would do to warfare in 1939: move humans at the speed of technology instead of moving technology at the speed of humans. Steam power used the coal trust fund (and later, oil) to fundamentally speed up human events and decouple them from the constraints of limited forms of energy such as the wind or human muscles. Blitzkrieg allowed armies to roar ahead at 30-40 miles per hour instead of marching at 5 miles per hour. Blitzeconomics allowed the global economy to roar ahead at 8% annual growth rates instead of the theoretical 0% average across the world for Mercantilist Zero-Sum economics. “ProGress” had begun.

It is fairly obvious that Schumpeterian growth has been fueled so far by reserves fossil fuels. It is less obvious that it is also fueled by reserves of collectively-managed attention... I am not sure who first came up with the term Peak Attention, but the analogy to Peak Oil is surprisingly precise. It has its critics, but I think the model is basically correct. (Attention Economy)

Without realizing it, the hundreds of entrepreneurs, Start Up-studios and incubators, Four Hour Work Week-ers and Lifestyle Design-ers around the world, experimenting with novel business structures and the attention mining technologies of social media, are collectively triggering the age of Coasean growth (Network Economy)... Coasean growth is fundamentally not measured in aggregate terms at all. It is measured in individual terms. An individual’s income and productivity may both actually decline, with net growth in a Coasean sense. How do we measure Coasean growth? I have no idea.

The fundamental scarce resource that Coasean growth discovers and colonizes is neither space, nor time. It is perspective. (Point Of View)

Jun29 update: every day more great comments being added.