Collective Conscious

The big banks of the last decade hoped to reshape Archimedes’ words in their own grand fashion. Give us enough lever­age, they said, and we shall move the world. The energy cor­po­ra­tions of the 1990s shocked the world and sent black­outs rolling across our cities before black­ing out themselves. In the Gilded Age, robber-barons  dom­i­nated oil from well to waste, see­ing even­tu­ally an eco­nomic cat­a­stro­phe that reshaped the world. Big cor­po­ra­tions seem to have a way of get­ting out of con­trol and into trou­ble. Who is next to fall?

We have pro­nounced the arrival of the Inter­net Age time and time again, but it is only at last arriv­ing in full. In this decade we have seen the rise to power of three of the most ver­sa­tile Web enter­prises ever — Google, Apple, and Face­book. They promise to rev­o­lu­tion­ize our soft­ware, our hard­ware, and our very means of relat­ing to each other. What goes unmen­tioned is the house of cards they will have to build to do it.

Com­pa­nies must grow to sur­vive. This is a sim­ple fact of eco­nom­ics — just as in fit­ness, “you’re either get­ting bet­ter or you’re get­ting worse.” This is under­stand­able — and sus­tain­able — in most of the busi­nesses we know and love, from hard­ware stores to fast-​​food chains to beer bot­tlers. Every now and again, how­ever, an indus­try emerges whose prod­uct is not bound by the con­ven­tional laws of physics and there­fore nei­ther by the con­ven­tional laws of economics.

Oil, energy, and money were three such prod­ucts. They dis­obeyed the laws of dimin­ish­ing returns and instead became increas­ingly lucra­tive as their pro­duc­ers grew to titanic pro­por­tions. It is impos­si­ble to com­pete in such a mar­ket; if your prod­uct is cheaper the more of it you make, the nat­ural eco­nom­ics of these prod­ucts has no equi­lib­rium but only a growth path towards ever-​​greater con­sol­i­da­tion and ever-​​cheaper production.

At some point, how­ever, the con­sol­i­dat­ing drive of a decreasing-​​cost indus­try leaves only one or a few immense firms in the indus­try. Leviathans such as Stan­dard Oil, Enron, and Lehman Broth­ers come to dom­i­nate their mar­kets, but are left with­out Adam Smith’s dis­em­bod­ied hand to point them in the right direc­tion. With­out the free-​​market lifeblood of com­pe­ti­tion, they age and rot.

Today infor­ma­tion itself is on the verge of cre­at­ing a new cadre of leviathan cor­po­ra­tions. The process of con­sol­i­da­tion has been long and is still ongo­ing, but the mar­ket lead­ers are becom­ing even more pow­er­ful as they expand, promis­ing a rev­o­lu­tion every week­end and, often, deliv­er­ing it. Infor­ma­tion, music, peo­ple — these are their wares, and like oil, energy, and finance, the more the merrier.

In this con­text, todays Times’ reflec­tion is a non sequitur: “Can monop­o­lies exist online, when com­pe­ti­tion is only a click away?” They can, and they will. As the Times notes, they are not being uncom­pet­i­tive on pur­pose — they exist in an indus­try of nat­ural monopoly.

In the past such indus­tries have exploded, leav­ing craters in the eco­nomic land­scape and let­ting tax­pay­ers pick up the pieces. The new giants were they to col­lapse, would leave an equiv­a­lent hole in the online econ­omy. Imag­ine life with­out Google, with­out Face­book, with­out Apple: why bother to turn a com­puter on? Nearly every­thing we do is medi­ated by one of these three com­pa­nies, from our daily news to our per­sonal communications.

So it is of immense impor­tant to under­stand whither these mas­ters of the uni­verse are bound. They may col­lapse like the titans of yes­ter­year, bring­ing to an end the Gilded Age of an ad-​​funded online fiesta and replac­ing it with some­thing bleaker, more util­i­tar­ian, and more expen­sive. They may be reg­u­lated into docil­ity, as energy com­pa­nies have come to be. Or they may grow, and grow, and grow, until they them­selves con­sti­tute new forms of human orga­ni­za­tion — enti­ties grand enough to nego­ti­ate with nations, at which point we will truly have entered a new unknown.

(Photo: jay­gooby)