The Sovereign Individual


Discuss the powerful shift from a world defined by industry and large corporations to an information-based society that empowers the individual. "The theme of this book is the new revolution of power which is liberating individuals at the expense of the twentieth-century nation-state. Innovations that alter the logic of violence in unprecedented ways are transforming the boundaries within which the future must lie. If our deductions are correct, you stand at the threshold of the most sweeping revolution in history.

The Rabbit Hole is written by Blas Moros. To support, sign up for the newsletter, become a patron, and/or join The Latticework. Original Design by Thilo Konzok.

Key Takeaways

  1. This is a situation with striking parallels in the past. Whenever technological change has divorced the old forms from the new moving forces of the economy, moral standards shift, and people begin to treat those in command of the old institutions with growing disdain. This widespread revulsion often comes into evidence well before people develop a new coherent ideology of change.
  2. An entirely new realm of economic activity that is not hostage to physical violence will emerge in cyberspace. The most obvious benefits will flow to the “cognitive elite,” who will increasingly operate outside political boundaries.
  3. The coming transformation is both good news and bad. The good news is that the Information Revolution will liberate individuals as never before. For the first time, those who can educate and motivate themselves will be almost entirely free to invent their own work and realize the full benefits of their own productivity. Genius will be unleashed, freed from both the oppression of government and the drags of racial and ethnic prejudice. The brightest, most successful and ambitious of these will emerge as truly Sovereign Individuals. At first, only a handful will achieve full financial sovereignty. But this does not negate the advantages of financial independence. The fact that not everyone attains an equally vast fortune does not mean that it is futile or meaningless to become rich.
  4. Equally, in the future, one of the milestones by which you measure your financial success will be not just now many zeroes you can add to your net worth, but whether you can structure your affairs in a way that enables you to realize full individual autonomy and independence. This will leave individuals far more responsible for themselves than they have been accustomed to being during the industrial period. It will also precipitate transition crises, including a possibly severe economic depression that will reduce the unearned advantage in living standards that has been enjoyed by residents of advanced industrial societies throughout the twentieth century.
  5. Microprocessing reduces the size that groups must attain in order to be effective in the use and control of violence. As this technological revolution unfolds, predatory violence will be organized more and more outside of central control. Efforts to contain violence will also devolve in ways that depend more upon efficiency than magnitude of power.
  6. Some conglomerates, such as AT&T, Unisys, and ITT, have split themselves into several firms in order to function more profitably. The nation-state will devolve like an unwieldy conglomerate, but probably not before it is forced to do so by financial crises.
  7. As technology revolutionizes the tools we use, it also antiquates our laws, reshapes our morals, and alters our perceptions.
  8. The new information and communication technologies are more subversive of the modern state than any political threat to its predominance since Columbus sailed. This is important because those in power have seldom reacted peacefully to developments that undermined their authority. They are not likely to now.
  9. We believe that the age of individual economic sovereignty is coming. Just as steel mills, telephone companies, mines, and railways that were once “nationalized” have been rapidly privatized throughout the world, you will soon see the ultimate form of privatization—the sweeping denationalization of the individual. The Sovereign Individual of the new millennium will no longer be an asset of the state, a de facto item on the treasury’s balance sheet. After the transition of the year 2000, denationalized citizens will no longer be citizens as we know them, but customers.
  10. If you fail to transcend conventional thinking at a time when conventional thinking is losing touch with reality, then you will be more likely to fall prey to an epidemic of disorientation that lies ahead. Disorientation breeds mistakes that could threaten your business, your investments, and your way of life.
  11. In our view, the key to understanding how societies evolve is to understand factors that determine the costs and rewards of employing violence. Every human society, from the hunting band to the empire, has been informed by the interactions of megapolitical factors that set the prevailing version of the “laws of nature.”
  12. To see “outside” an existing system is like being a stagehand trying to force a dialogue with a character in a play. It breaches a convention that helps keep the system functioning. Every social order incorporates among its key taboos the notion that people living in it should not think about how it will end and what rules may prevail in the new system that takes its place. Implicitly, whatever system exists is the last or the only system that will ever exist. Not that this is so baldly stated. Few who have ever read a history book would find such an assumption realistic if it was articulated. Nonetheless, that is the convention that rules the world.
    1. Galilean Relativity
  13. Here are some summary points that you should keep in mind as you seek to understand the Information Revolution: A shift in the megapolitical foundations of power normally unfolds far in advance of the actual revolutions in the use of power. Incomes are usually falling when a major transition begins, often because a society has rendered itself crisis-prone by marginalizing resources due to population pressures. Seeing “outside” of a system is usually taboo. People are frequently blind to the logic of violence in the existing society; therefore, they are almost always blind to changes in that logic, latent or overt. Megapolitical transitions are seldom recognized before they happen. Major transitions always involve a cultural revolution, and usually entail clashes between adherents of the old and new values. Megapolitical transitions are never popular, because they antiquate painstakingly acquired intellectual capital and confound established moral imperatives. They are not undertaken by popular demand, but in response to changes in the external conditions that alter the logic of violence in the local setting. Transitions to new ways of organizing livelihoods or new types of government are initially confined to those areas where the megapolitical catalysts are at work. With the possible exception of the early stages of farming, past transitions have always involved periods of social chaos and heightened violence due to disorientation and breakdown of the old system. Corruption, moral decline, and inefficiency appear to be signal features of the final stages of a system. The growing importance of technology in shaping the logic of violence has led to an acceleration of history, leaving each successive transition with less adaptive time than ever before.
  14. The key to unlocking the implications of megapolitical change is understanding the factors that precipitate revolutions in the use of violence. These variables can be somewhat arbitrarily grouped into four categories: topography, climate, microbes, and technology.
  15. Other things being equal, the more widely dispersed key technologies are, the more widely dispersed power will tend to be, and the smaller the optimum scale of government.
  16. Cultures are not matters of taste but systems of adaptation to specific circumstances that may prove irrelevant or even counterproductive in other settings. Humans live in a wide variety of habitats. The wide number of potential niches in which we live require variations in behavior that are too complex to be informed by instinct. Therefore, behavior is culturally programmed.
  17. In a few verses the biblical account encapsulates logic that took thousands of years to play out. Farming was an incubator of disputes. Farming created stationary capital on an extensive scale, raising the payoff from violence and dramatically increasing the challenge of protecting assets. Farming made both crime and government paying propositions for the first time.
  18. If our reasoning is correct, the nation-state will be replaced by new forms of sovereignty, some of them unique in history, some reminiscent of the city-states and medieval merchant republics of the premodern world. What was old will be new after the year 2000. And what was unimaginable will be commonplace. As the scale of technology plunges, governments will find that they must compete like corporations for income, charging no more for their services than they are worth to the people who pay for them. The full implications of this change are all but unimaginable.
  19. As information technology alters the logic of battle, it will antiquate the myths of citizenship just as assuredly as gunpowder antiquated medieval chivalry.
  20. Gunpowder weapons radically altered the nature of society in yet another way. They separated the exercise of power from physical strength, thereby lowering the opportunity costs of mercantile activity. Rich merchants no longer had to depend upon their own finesse and strength in hand-to-hand combat or on mercenaries of uncertain loyalty to defend themselves. They could hope to be defended by the new, larger armies of the great monarchs.
  21. The capacity to mass-produce books was incredibly subversive to medieval institutions, just as microtechnology will prove subversive to the modern nation-state. Printing rapidly undermined the Church’s monopoly on the word of God, even as it created a new market for heresy. Mass production of books ended the Church’s monopoly on Scripture, as well as on other forms of information. The wider availability of books reduced the cost of literacy and thus multiplied the number of thinkers who were in a position to offer their own opinions on important subjects, particularly theological subjects.
  22. In short, the scrapping of ceremonial overload in the medieval Church opened the way for an appreciable increase in output simply by freeing time that would otherwise have been lost to commerce.
  23. The shift away from the medieval paradigm helped prepare people to think in “modern” terms about cause and effect, rather than in terms of symbolic linkages and allegoric personification.
  24. An equally striking parallel arose from a tremendous surge in crime. The breakdown of the old order almost always unleashes a surge in crime, if not the outright anarchy of the feudal revolution we explored in the last chapter. This is worth remembering as you plan ahead. The twilight of state systems in the past has seldom been a polite, orderly process.
  25. As Tilly suggests, the important issue was “effectiveness (total output),” not “efficiency (the ratio of output to input).” In an increasingly violent world, the systems that predominated through five centuries of competition were necessarily those that facilitated the greatest access to resources needed to make war on a large scale.
  26. When you come to understand why, you are much closer to recognizing what the fall of the Berlin Wall and the death of Communism really mean. Far from assuring that the democratic welfare state will be a triumphant system, as has been widely assumed, it was more like seeing that a fraternal twin has died of old age. The same megapolitical revolution that killed Communism is also likely to undermine and destroy democratic welfare states as we have known them in the twentieth century.
  27. Thinking about government as an economic unit that sells protection led Lane to analyze the control of government in economic rather than political terms. In this view, there are three basic alternatives in the control of government, each of which entails a fundamentally different set of incentives: proprietors, employees, and customers.
  28. When returns to violence are high and rising, magnitude means more than efficiency. Larger entities tend to prevail over smaller ones.
  29. Societies that reconfigure themselves to become more complex adaptive systems will indeed prosper. But when they do, they are unlikely to be nations, much less “political superpowers.” The more likely immediate beneficiaries of increased complexity of social systems will be the Sovereign Individuals of the new millennium.
  30. When technological conditions raised the returns to violence, they doomed societies that were not organized to channel large resources into making war.
  31. That is the fact that governments have never established stable monopolies of coercion over the open sea. Think about it. No government’s laws have ever exclusively applied there. This is a matter of the utmost importance in understanding how the organization of violence and protection will evolve as the economy migrates into cyberspace, which has no physical existence at all. For the same reasons that Lane noted in observing that no government has ever been able to monopolize violence on the sea, it is even less likely that a government could successfully monopolize an infinite realm without physical boundaries.
  32. In the age of the virtual corporation, individuals will choose to domicile their income-earning activities in a jurisdiction that provides the best service at the lowest cost. In other words, sovereignty will be commercialized. Unlike medieval frontier societies, which were in most cases impoverished and violent, cyberspace will be neither. The competition that information technology is driving governments to engage in is not competition of a military kind, but competition in quality and price of an economic service —genuine protection. In short, governments will be obliged to give customers what they want.
  33. As Lane said, “I would like to suggest that the most weighty single factor in most periods of growth, if any one factor has been most important, has been a reduction in the proportion of resources devoted to war and police.”
  34. To an increasing degree, individuals capable of creating significant economic value will be able to retain most of the value they create for themselves. Support staff that previously absorbed a large part of the revenue generated by the principal income creators in an enterprise will be replaced by low-cost automated agents and information systems. This implies that an organization will be better able to assure itself of the highest quality of service by contracting it out, rather than by keeping the function within the firm, where it will be relatively more difficult to reward individuals for performing a task well. A virtual corporation will eliminate most “organizational slack” by eliminating the organization.
  35. As scale economies fall, and capital requirements for many types of information-intensive activities fall simultaneously, there will be a strong incentive for firms to dissolve. Business operations will be more ad hoc and temporary. Firms will tend to be more short-lived. Virtual corporations that assemble talents for specific purposes will be more efficient than long-standing companies.
  36. The thesis of this book is that the massed power of the nation-state is destined to be privatized and commercialized. Like all truly radical institutional change, the privatization and commercialization of sovereignty will involve a revolution in the “common sense” of the way the world is comprehended. Such change seldom happens in a gradual, linear way. To the contrary. Indeed, for reasons we explored in The Great Reckoning, it is practically ruled out. We expect the Information Age to bring discontinuities—sharp breaks with the institutions and the consciousness of the past.
  37. Who will the losers be in the Information Age? In general terms, the tax consumers will be losers. It is usually they who could not increase their wealth by moving to another jurisdiction. Much of their income is lodged in the rules of a national political jurisdiction rather than conveyed by market valuations.
  38. In our judgment, the opposite is happening today. Information technology is raising earnings opportunities for the skilled and undermining institutions that operate at a large scale, including the nation-state. This is an example with important application for the future. It suggests that thinking entrepreneurs in the next millennium will first introduce dramatic labor-saving automation in regions without a tradition of producing whatever product or service is in question.
  39. The most talented executives in the world could be attracted to run faltering governments if they could be paid on the basis of results they actually achieve for society. A leader who could significantly boost real income in any leading Western nation could justly be paid far more than Michael Eisner. In a better world, every successful head of government would be a multimillionaire.
  40. In the future, excessive scale could be not only counterproductive but dangerous. Larger enterprises make more tempting targets. As practitioners of the underground economy demonstrate, one of the secrets of avoiding taxation is to avoid detection.
  41. A good social morality has certain characteristics. It should contribute to the survival of society and of individuals, in a dynamic rather than static way. It should include tolerance and avoid self-righteousness. It should be religious, rather than merely agnostic. It should not pretend to decide questions of scientific fact. It should be neither anarchic nor authoritarian. It should be widely shared and deeply held. Such a social morality is particularly important to the family and to the raising of children as independent and responsible adults. It provides the focus of a good society. Several features of the new morality can be foreseen. For one thing, it will emphasize the importance of productivity and the correctness of earnings being retained by those who generate them. Another corollary point will be the importance of efficiency in investment. The morality of the Information Age applauds efficiency, and recognizes the advantage of resources being dedicated to their highest-value uses. In other words, the morality of the Information Age will be the morality of the market.
  42. This underscores the wisdom of the traditional liberal education, which aimed to encourage students to develop their critical faculties and thinking skills. Success in business, as in most areas of life, depends upon being able to solve problems. If you can teach yourself how to solve problems, you have a bright career ahead of yourself. No matter where you live, you will find problems galore in need of solving. In most cases, those who would benefit from solutions of their problems will pay you handsomely to effect them.

What I got out of it

  1. Fascinating book and its hypotheses seem to ring true in today's age. Smaller, more agile, more flexible teams, empowering the individual...

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