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The Four Great Realizations
by Stirling Newberry
In the previous article, I outlined the four great challenges of the 21st century: the end of extraction, the death of information, the collapse of corporate-capitalist socialism and the ocean of labor arbitrage.
What follows are the four great realizations that will allow us to cope with these changes.
The most crucial is the end of extraction. The 20th century is a gift of a vast wave of extraction: the poster child for this is oil. Extraction is when value can be generated much more easily than by any alternatives, but in a non-sustainable manner. That means that extraction can be of natural resources, but it can also be of human resources, or social capital. One example is to slash education to the bone, and save money, until the uneducated become adults. Or slashing public health. Looks great until the next epidemic. The 20th century was dominated by a series of struggles over the control over extraction.
With the end of extraction comes the death of information as a high profit commodity. Information is the converse of extraction. Extraction is profitable and volatile, and thus information – being ahead of the crowd by just a little bit – is the converse side of it. With the end of extraction, comes the end of the advantage of making a decision a little bit faster than other people.
With the end of extraction and information, the borders of the world for labor are going to open. This means that instead of having to support roughly 1.4 billion people in the affluent standard of living, the world will have to support close to 4 billion at that standard within a generation. This feeds back into the problem of extraction ending. The Nile of Oil is simply not wide enough.
With the end of extraction and information as valuable, and with the opening of the world, comes the last challenge, which is the sum of the others. For two generations corporations and nations have bought labor peace by giving out benefits, and by being given benefits from governments. The flow of materials, labor, and goods could not be allowed to fall, because on these rested the military machine that defended the extraction and processed the information. That lived in the house that Jack built. Without the need for labor peace, companies are no longer willing to pay for it.
This means the end of the affluent position of the United States as we have known it, since the United States is the dominant power precisely because it won, not control over resources, but control over the game by which the profits of extraction and information were distributed. Oil was the ultimately extractable commodity, and the dollar was the means by which economic information about the profits of that extraction was transmitted.
A realization does not favor the left or the right, which ever political viewpoint is first able to assemble these four realizations into a coherent view which people understand and can act on, will dominate the century. The intellectual race is on to find a way to create a program that can be condensed down to something that will fit on the back of a postcard.
Here then are the four great realizations:
1. Capital everything.
Extraction is profitable. But there are two things that it is not: scalable and sustainable. Extraction can be of minerals, but it can also be of fertile soil. Extraction dies in one of two ways, one is the death of scarcity: there isn’t enough of what is valuable to keep everyone happy. This is what happened to the gold standard, and it is what will happen to the oil standard. The other death is the death of abundance: so many extract that whatever special value extraction had goes away. Silver died this standard, there was too much of it.
Whenever an extractive step is replaced by capital, that step becomes sustainable. It may create problems elsewhere, by demanding something else that is extraction, but the particular bottleneck disappears. The end of the railroad monopoly ended the particular bottleneck of people having to sell their produce for what the railroad companies would buy it for.
The first great realization is that the world, as a whole, is going to have to replace extraction with capital where ever it appears. This will not be done overnight, or in one step. But it is the first realization: look at each thing, and ask what it extracts, and ask how to end that extraction without extracting something else that is as scarce.
Currently the right is extremely hostile to capital and capitalism in general. Instead the right wing is telling people to profit from one massive splurge of extraction, land, water, oil of course, but also of soft power – American prestige, trust and position. Strip mining the nations credit, as well as its land. The left, however, also has problems. There are many who still believe that the solution is to retreat to some form of labor rent. Given the pressures of labor arbitrage, given the pressures of the end of extraction – where fewer and fewer people will be able to be “inside” the value of the extractive system, a half generation attempt to close the borders is inevitable.
But since extractable wealth is not concentrated in developed, or even developing, nations, this attempt is doomed to failure.
People should not be fooled by ideologies that scream that they are "capitalist", when in fact they are extractionist. Extractionism, and keeping the profits of extraction, is doomed, simply because the limits of extraction - like the limits of labor exploitation in the early 20th century - are being reached. When exploitation of the population of industrial or industrializing nations was reached, the result was an explosion of revolutions - including the two great totalitarian revolutions of Hilter and Stalin.
The world does not need a repetition of this mistake.
2. The Knowledge to Do.
As long as profit is made from extraction, and its converse, information – which is, remember the reduction in uncertainty enough to make a decision – the economy will be an energy-information state. Nations will balance their economies based on how much information they can export to buy energy. The information economy was fundamentally extractive: the goal was to get customers to pay more for things that cost less to produce. What was the largest spread between what it cost to make and what people would pay for, what were the items that people would pay more for if made options, how could “demand” be managed. The consumer was a mountain to be strip mined, on the belief that consumers would borrow or work more to buy more.
This entire cycle is coming to an end, because it relied on the belief that the US could package information and sell it for extracted energy. That’s what a stock is – information. Information gathering is fundamentally a reductionist and extractive enterprise – somewhere in the slag heap of data, is one bit of data that is worth something, which is information. The amount of holistic and large scale analysis that was done was actually very small. Either data was refined with statistics, or mined by searching.
As long as extraction was the ultimate source of profit, in the same way that labor exploitation and expansion was the ultimate source of profit in the late 19th and early 20th century – the economy had to be geared to encouraging extraction, and generation of information.
That meant that information was to be locked up in one form or another. The extractive economy wants information to be property the same way land is, hence its term “intellectual property”. The fight was to create information that could be treated like grabbing the chunk of land with oil under it. Hence Microsoft and Intel were the great winners of the old information economy – they created a bottleneck and charged horribly high rents.
To end the incentive to extract means that information has to be free. Why is Rick Santorum backing a bill to prevent the national weather service from making its data easily available? Because he wants people to die in storms? No, because he wants to keep information expensive so others can charge for it. Why are states such as Ohio and Pennsylvania passing laws preventing the state from engaging in information infrastructure? Because others want to charge huge mark ups on it.
The Open Source economy rests on a different basis, not on finding the “right” bit of information, or establishing the canonical file format, microcode or GUI API – but on creating an assemblage of the whole that is the best whole package. It is not any one article that makes Wikipedia better – it is the process that make wikipedia. It is not any one piece of information that makes a Linux distribution, it is the whole selection. It is not any one website that makes Google the search engine of choice – it is the continuous process of improving algorithms so that they are closest to what people actually want to find.
The open source economy then, rests on knowledge – a holistic quantity, rather than information, a reductionist quantity. This has a powerful implication: ideology is destructive. The information society is increasingly ideological, because it is ideology that forms the “framework” that information exists within. I’m going to explain this in a bit of detail, because it is an important theoretical idea.
Information assumes that there is a signal, that signal reduces the uncertainty in a receiver. But for their to be uncertainty, there must be a selection of possibilities. The reason the information society is ideological, is because ideology reduces the selection to a manageable size. This reduction is important, because the most important feature of information in an extractive world is to act first. It is, ultimately, better to be wrong more often, so long as one is certain and first more often. Imagine the extraction-information economy as a roulette wheel that allows bets all the way up to the last moment. Imagine that the pay off for betting right drops with each bet. One way to win is to have a lot of money and bet when there is complete uncertainty – the other is to wait for the crucial moment where the right number is clear, but no one else has bet, and be willing to pull the trigger very fast. It is better to be wrong often, and first often, than to be always right and somewhere in the middle of the pack. Ideology, by reducing the possibilities, means that signal can be processed fastest.
But in a world where the number of profitable single nuggets of golden information is dropping, because there is less extraction for them to be tied to, being anti-ideology is, in itself, an advantage, because it allows the structuring of the totality into knowledge, an understanding of the broad terrain of risks that creates the ability to understand where there are gaps between perception and reality. These can be exploited over the long term to create value.
3. The End of Ideology
What follows from the knowledge economy, is the death of ideology. Ideology creates blinders. In the extraction economy, everyone pushed for the rules to be structured in ways they liked, so that they would have an advantage in the giant game of whack a mole. It would be as if there were a competition between people who were near sighted and people who were far sighted. The near sighted people wanted the game to be about detailed work close in, and the far sighted people wanted the game to be about who could see a sign first.
In a word where the structuring of the whole is the key goal, and the creation of non-extractive capital the basis for survival and prosperity, such ideological wars and conflicts are dangerous and counter-productive. Survivability, scalability and sustainability are the ideologies that matter – the rest is detail.
Again, as extraction nears its peak, ideology will get worse, not better, the pressures of the political system will be to hold ever more firmly to a view point, espouse it with ever greater certainty – and hope the bottom doesn’t fall out before you, personally, cash out. The post-ideological world is fundamentally different – it doesn’t want to encourage people to try and profit immensely from extraction. Extraction in the knowledge economy world is like a small crack through which people will escape – even if it means that they trample each other to death to get out of it.
Ideology, because it creates stampedes and creates incentives to block, alter, or withhold information which is needed to engage in the larger project of capitalizing the economy – must be de-incentivized. Instead, the incentive must be for those who can build institutions that will create knowledge, and create people and social structures that are able to act on that knowledge.
4. The Social Contract
Risk is the key concept of the extractive-infomration world. It means how much before certainty are you willing to act. Either one spreads ones money very far and wide before the wheel spins, hoping to take advantage of a flaw in the pay out system – or one holds chips, watches the wheel, and tries to slam them down before someone else does. Risk, in the extraction society, flows downward to individuals, while the profit flows upwards to those who control organizations.
The last realization is that at a certain crucial point, people will stop believing that they will be winners in the game of extraction, and will, instead, spend all of their time worrying about being losers. At that point, the risk tolerance of whole societies will drop to zero, Whole nations will follow the Argentina route – close the doors, reduce risk, and deal with the consequences. In fact, a period of closing is now inevitable, in no small measure because of the policies of the United States government over the last 20 years, which has sought to dump risk down on to individuals, and out on to other nations.
Since industrialization relies on economies of scale, and capital relies on the replacement of labor with knowledge, the death of universal participation means the collapsing down of the world economy to a lower curve of total output. This drop will be a sharp world recession. There will be two possible responses, one is a death spiral of retrenchment, the other is an end to using people as targets of consumer extraction.
The Social contract then is to give people the ability to pursue the knowledge economy, without having to gamble on the temporary ups and downs of the economy. In an extractive world, volatility is good, because it allows people to profit. In a capital world, volatility is bad.
In the 20th century, social services were meant to buy labor peace, and prevent political unrest. In the 21st century, they will be designed for a different social purpose - to discourage extraction and to make it so that there is no profit to be had from protectionism or other competition sheltered activities.
Summary
These four realizations can be achieved in a variety of ways. However, there will be one best solution – one that is the best combination of being right and being understandable. After all, a policy can’t be any smarter than the people who run it, and it cannot take any longer to make decisions than there is time to make them in. Each one of these realizations answers one of the challenges. They require uprooting old attachments – an entire society has evolved to extract, and to search for information that leverages extraction. In the United States the political right is the party of extraction, and the political left is the party of information, and they are engaged in a death struggle over which side gets more of the non-existent profits of extraction. In fact, the US is bleeding debt, because the entire trade of “information for extraction” that the US relies on is dying. The United States does better under Democrats because Democrats favor the information side of the equation, and the US sells information, but neither side can deal with the vast demographic realities and end of extraction realities which will dominate the 21st century and be the basis for reaching the 22nd century.
Imagine you were teleported back to 1900, and asked which of the two major parties was “right” about the issues of the 20th century. The laissez-faire inflationist Democrats? Or the protectionist gold standard republicans? Imagine someone asked you “Will the dollar be based on silver or gold in 2000?”
To both questions, you would answer “Neither, it is a whole different world coming.”
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