Saturday, October 19, 2013

Networks and Centralization: Part Two

As discussed in the previous post, a fundamental aspect of life is that nature limits available energy and power production. Many patterns emerge from this limitation. For example, in human settlements, like cities, where energy can be expended by machines or lots of people, roads, property, and buildings tend to be built following geometric plans like a grid, rather than along the energy minimizing routes like deer or pedestrians make through fields.

The logical pattern of these natural energy minimizing routes is a star network. Nodes are linked by one or several connections. Between cities, roads, like the US interstates, follow these energy minimizing paths. Even airports and air routes follow the hub and spoke system. The star network introduces strategic value to locations in the map of nodes and routes.

To see the network in strategic terms is to adopt the view of a predator, like a wolf pack stakes out a watering hole or along the paths leading to it, or a mountain lion hides in a tree overlooking a path to wait for a deer. Or, in terms that aren't flattering, it's the tapeworm that takes up residence in the gut of a cow, or the leech that waits in the watering hole to attach to the leg of an unfortunate animal.

In human societies, laws and culture govern the equivalent of the producer-parasite relationships. However, the effectiveness of the laws is limited (or amplified) by nature. In commerce the hard work, creativity, time, and energy of the builders of a company become a mere cash flow that's acquired by a financier. The builders of the company do the hard work of transforming and working material to make useful things. The financier extracts all the value with a few signatures and shuffling of paper.

Generally, businesses are organized to expedite their acquisition--as if they come with handles attached. Their "value" is represented in symbolic or paper terms--this is often a side effect of the accounting that's necessary to pay taxes. In the US, the laws shape them from the very beginning creating a hierarchical organization from the start, so when an acquisition is triggered, a few years of cash flow are brought forward with a loan, the principle divided among the owners, and the debt and interest transferred to the company and its workers.

However, if you look at the flow of information and energy and work within a company, the vast flux of that flow is through the workers, while the management and ownership are off on an island. However, they accrue the tapeworms' share of benefits. In some cases, the management or owners are utterly ignorant of the essential elements of the business and see it only in financial terms. Hence, the tendency of companies to grow larger through acquisition and the tendency toward monopoly and combination, and typically, eliminate redundant systems and workers to accrue more benefits to owners, seems to be at odds with this.

Here again, the principle of "inside/outside" is at play. The strategic view of the owners is completely at odds with the workers. The workers are, perhaps by necessity of the numbers involved, unable to participate in strategic decision making, or they're just duped.

So the essential question is: do these tendencies arise from natural laws, and represent underlying natural processes, such as network effects, or are they actually contrary to these effects and merely imposed arbitrarily by the laws and customs of men?

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