Geoffrey Long
Tip of the Quill: Archives
Future America = past America?
New new Economy, by Andy Gilmore
Recently I've been reading a ton about the so-called "future of work". The May 25th, 2009 edition of Time used that phrase as its cover story, and Chris Anderson takes the cover story in the June 2009 issue of Wired, in which he explores "The New New Economy: More Startups, Fewer Giants, Infinite Opportunity". Both of these magazines are describing something that we've seen coming for a while now, or at least those of us who picked up Dan Pink's Free Agent Nation way back in May of 2001. It's been a long time coming, but anyone reading these articles or the New York Times' writeup of today's General Motors bankruptcy announcement can see the writing on the wall.

Big, corporate America may be over. As Anderson puts it:

Huge vertically integrated conglomerates were created to minimize what economist Ronald Coase called transaction costs between teams and up and down the supply chain. Now distributed-information networks would do the same outside the walls of a single company. The Web would be globalization taken to the extreme. Projects would be open to the best of breed anywhere, creating virtual flash firms of suppliers and workers that would come together for one product and then re-form for another. "Small pieces, loosely joined" was the mantra.

But out in the reality of the world's great industries, the opposite seemed to happen. Corporations just kept getting bigger. On Wall Street, Goldman Sachs was pulling in almost $90 billion a year, tripling annual revenue in less than a decade. The pharmaceutical industry consolidated through hundreds of mergers and acquisitions. The Fortune 10, which today includes Wal-Mart and General Electric, more than tripled in size since 1990. And AT&T, far from breaking up into 300,000 different companies, became even bigger than before and, once again--at least for iPhone users--a monopoly.

And then last September it all came toppling down. Those big financial firms turned out to have been inflated by debt at levels never before seen (and hopefully never repeated). The big car companies crashed head-on into skyrocketing oil prices and plummeting consumer demand. Big Pharma ran out of blockbusters. Wal-Mart kept closing stores, while GE tried to sell off divisions. (OK, AT&T is still an iPhone monopoly, but give it time!)

So now, in the graveyard of giants, it's worth asking: Was Malone right? Was his age of nimble mammals simply delayed by the final march of corporate dinosaurs into the tar pits?

This crisis is not just the trough of a cycle but the end of an era. We will come out not just wiser but different.

What we have discovered over the past nine months are growing diseconomies of scale. Bigger firms are harder to run on cash flow alone, so they need more debt (oops!). Bigger companies have to place bigger bets but have less and less control over distribution and competition in an increasingly diverse marketplace. Those bets get riskier and the payoffs lower. And as Wall Street firms are learning, bigger companies are going to get more regulated, limiting their flexibility. The stars of finance are fleeing for smaller firms; it's the only place they can imagine getting anything interesting done.

As venture capitalist Paul Graham put it, "It turns out the rule 'large and disciplined organizations win' needs to have a qualification appended: 'at games that change slowly.' No one knew till change reached a sufficient speed."

The result is that the next new economy, the one rising from the ashes of this latest meltdown, will favor the small.

It's worth noting that "Small Pieces, Loosely Joined" is also the title of a great 2002 book by David Weinberger, on - surprise, surprise - the nature of the Internet.

I write these words with some trepidation, and I'll admit that this is one of those essays I'm writing more to get my own thoughts in order rather than in an attempt to convey some grandiose, sweeping idea to anyone reading this. I write this because I've seen firsthand both the glory and the terror of the post-corporate landscape. When I graduated from Kenyon in 2000, I spent several years working for a large corporation and enjoyed the benefits of such. Literally. I wasn't making a lot of money, but I did enjoy health insurance and subsidized transportation. It didn't take long for me to start doing consulting work on the side in order to make ends meet - and for a while there, things were going pretty well. Then, however, I suffered a pretty big personal fallout around 2002-2003, and within the space of a couple of months I was unexpectedly and heartbreakingly single and working for myself as a full-time consultant. The two were only partly related, but that was still one of the blackest points in my personal history.

And then I got a severe ear infection. Without health insurance.

I went to a quack doctor doing business in a double-wide trailer off the side of the freeway outside DC because I had no health insurance of my own and this was the best that my COBRA coverage (which was excruciatingly expensive) would pay for. She took a look at it, told me to take Tylenol and it would clear up. It didn't. Instead, it worsened, building up pressure until my eardrum blew out from the inside. I still have some hearing loss from that joyful experience. In fact, that ranks right up there with the time I spent with a broken wisdom tooth - also due to a periodic lack of health insurance - as good times.

It still wasn't enough to completely deter me from the joy of the self-employed lifestyle, and I stayed self-employed until I came here to start graduate work at MIT in 2005. I don't regret it at all, because that time was, I thoroughly believe, what qualified me to come to MIT - I spent an obscene amount of time studying, building, writing and learning, the kinds of things that are not inherently supported by major corporations, but are necessary to survive in the kind of nimble "future of work" advocated by Anderson, Pink and a whole host of other futurists that have been prophesying these shifts for decades. If this change happens the way they say it will, I'm ready. What's spooky is that America isn't ready - not only will this kind of change be downright terrifying for the majority of American workers in places like my own hometown, but America as a government isn't ready to support such a shift. Which is interesting, because in ways, this future America looks a lot like past America.

People talk about how in this future America, job security is a thing of the past. I think this is inherently false - job security will be much greater, if only because it's really damned hard to fire yourself. I suspect that the future will have a much greater number of Mom-and-Pop shops, only catering to either a global market, a hyperlocal market, or some wonderful combination of the two. In short, survival will require a much stronger sense of entrepreneurialism. If big corporations go bye-bye, they'll need to be replaced with smaller ones - and this isn't just smaller white-collar, blue-collar, green-collar or no-collar gigs, it's also the support staff for such industries. The "search for enough" may become the new crucial element, with a broader number of individuals finding that it costs less to thrive in a smaller environment than it does to compete with supercompanies, and the smaller companies thus prove to be more healthy. In a certain sense, the collapse of GM is a real "wizard behind the curtain" moment, showing that many corporations are sacrificing profitability (and sustainability) for the sake of appearances, for the sake of staying big - and that may not be what future America is all about. Future America may be about smaller scales, more intimate scales, the hyperlocal - while still catering to worldwide markets through the advent of the web. This is old Kool-Aid but still definitely drinkable; it's possible that this new depression is less of a depression and, as some have already suggested, a painful correction into the new business model that we've all seen coming for a while now.

Will a storefront in Wooster, Ohio house a company that makes specialty garden equipment and ships it to China? It's possible. Small, nimble, located outside of a major city where the cost of living is shot past all hope of sustainability... What frightens me, however, is that the health care and education components aren't there yet. I could totally go back to my consulting days, being nimble, quick and continually learning, except for two major fears: the abso-fucking-lutely ludicrous cost of health care in this country and the almost equally terrifying cost of putting one or more children through college. If Obama and the Democrats can step up to the plate and shore up the architecture needed to supply quality health care to every American (and not the quack doctor on the side of the freeway) as well as helping to get the cost of education back under control, then the collapse of GM and other similar companies may not be wholly a bad thing. Use whatever trite metaphor you want - phoenixes and ashes, eggs and omelettes - but what we're seeing here is a massive sea change, and it's one that we've absolutely seen coming - but the challenge is how to meet the challenges of infrastructure that will be needed to get this new, greener, more hyperlocal, and flat-out better America up and running as quickly as possible - and how we ourselves as individual Americans can realign our thinking to capitalize on the amazing opportunities that are riddled throughout this entire situation.

Smaller might be scarier, but it might also be happier - and it might also be a lot more sustainable. The key is in figuring out how to make that happen.

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