The Mystery
The police chief arrives without his radio at the scene of the ongoing child sacrifice. A school employee used a cell phone to open an app, select a red “lockdown” status and press another button to broadcast an “active shooter” status. The app was produced by a company called “Raptor Technologies.” which produced “Integrated school safety software that enables schools to screen visitors, track volunteers, report on drills, respond to emergencies, and reunite families.” According to an anonymous source quoted by the Department of Truth, "“No one entity or individual seemed to have control of the scene. It was chaos.”
The Origin
Roughly 175 years ago, a group of owner-managers working within the railroad and mining industries in the United States invented (by necessity) a completely new social body: the managed corporation. There had been corporations before, many of them, but the owners were more or less co-extensive with the managers.
Now came into reality a whole class of scientific, intellectual, interpersonal workers: the managers. To call the workers is not completely accurate. They do work, but they also rule: these are managed corporations. And they can achieve productive scales unheard of in human history.
In 1470, the Medici Bank had power on the scale of a large multinational financial corporation today, but only operated with seven branches. Fifty seven (57!) people worked at the Florentine HQ. This information comes from Alfred Chandler’s essay “The Emergence of Managerial Capitalism.” published in the Business History Review in 1984. Chandler writes:
“Today's middling-size state banks each have as many as 200 branches, 5000 employees, 3 salaried managers (who have no liability at all), and handle over a million transactions a day. They handle more transactions in a week than the Medici Bank processed in the century of its existence. Today, too, small industrial enterprises handle a far greater volume of transactions than did those giants of an earlier capitalism-the Hudson's Bay, the Royal African, or even the East India Company.”
The managers brought the same qualitative increase in productivity to all social spheres. Consider the overall increases in agricultural productivity wrought by the application of organized, managed biochemistry? Name your social sphere and you will find the same overall transformation: from a small family/human sized organization to transnational multilayered formalized organization. It may not yet be universal, but that makes it no less of a dominating revolution. Hegemony is not omnipresence, it is the fact of being inescapable, the undisputed winner in a contest, having won so decisively that forfeit is the starting state of challenge.
But is it all breaking? Has winter come for the managers? We can take the failure of a police chief to stop the murder of children as a metonym for the systemic failure of management along with every suicide, every overdose, all living homeless, all the money spent shipping sand to Iraq, all the dead in Iraq, Afghanistan, Libya, Syria.
How We Will Solve the Mystery
Through analysis of three stages in the development of managerial society. Today, a consideration of what makes managers possible: the preparation for the bonfire, and the early burning of the kindle. The second part describes the fire itself: the Second World War and the so-called Third Industrial Revolution. And in the last installation we will example the creation of an unstable alliance between capitalist and manager and why “neoliberal” is a bad name for said alliance.
Yep, It’s Competition
You’ll hate reading this word. Competition. We sound like Milton Friedman, a social Darwinist, Ayn Rand and Marco Rubio. The engine of liberalism! It’s always competition isn’t it? But people have always competed for status.
Information and Static
The field of competition changes under our feet continually. It’s axiomatic, it’s Daoist, it’s something very deep. The world moves. It has waves, eddies, whirlpools. The second conflict heats up, we talk about a fog of war, where epistemic certainty is impossible.
Information and with it knowledge, is defined by what passes through the first epistemic logic gate: recognition/nonrecognition. What are the relevant facts? Can you even know the relevant facts of what’s happening a room over? Sure, but your attention has been divided and taken from you.
There is always static in communication. All forms. All signals are lossy.
This is all to say, social forms often don’t recognize that they are in competition with each other until well after the process has concluded decisively for the victor, and resistance is futile. People do not uniformly accept the new and more efficacious belief system when it is actually ascendant, often the signal is so confused from the rest of the noise of reality that they wait to grab on until it is far too late.
Competition ca. 400 – 1500 CE
Let’s look at the dynamic of competition in a slightly abstracted feudal Europe. Nothing is of course universal in feudalism, it is too patchwork to be a monolith. But there is a certain oneness of feudalism we can discuss.
Back in the day, title, and with it land and revenues are inherited, or conferred. You can of course buy a title—the nobles of the robe. You can of course earn a title and pass it on to your children. This was the making of great kingdoms and dynasties. Over time, new stations of nobility, with land and revenues are foreclosed against—there are simply too many nobles after a few hundred years, and little land left to carve without harming the bunch that lives there now.
History shows that no title lasted forever—nor did revenues, armies, or dynasties. But, at a local view, up close, you see that title is durable, it is nonfungible, it is imperishable. To be stripped of your title was to have done a grave, grave treachery, that cast you out of the social order. It was certainly not a concern of the majority of feudal lords!
Performance was not a strong incentive for the titled. The French Revolution was in large part motivated by this inescapable fact. To be good or bad as a noble was ultimately a matter of character, ability, opportunity. Rare was the estate holder who managed his estate—it was not an existential priority. If your manor was poorly run, certainly it would not bode well for you, but you would simply be the lord of an empty field, responsible for only a few souls. Your power would be limited severely by ruinous choices, or prolonged conflict. If your estate gave you no wealth, you were obliged to seek more to live well. This did, from time to time, motivate men of genius, daring, and low cunning to seek a higher station in life. But to have the necessities of life and an enjoyable amount of wealth was quite easy for a landed military aristocracy in the end. Competition amongst peers then stayed at a low simmer, and boiled over only occasionally, and intermittently at that. Warfare was a constant to be sure, but it was not at the scale or intensity or of the conduct that we understand as war today.
In other words, social pressure amongst other title holders results in limited competition. To extinguish a title, claim its lands and revenues, would require a level of force and organizational acumen that was not viable—to pursue warfare at home would diminish revenues from subjects, it would invite general warfare! A world where titles were under attack, where the privilege of nobility was continually put to an end by the sword?
Warfare of course happened. But it was never total, because of the very nature of nobility. After all weren’t they all in the same hierarchy of status? Feudal lords did not compete endlessly for the seat of the monarch—nor was aggression between neighboring lords usually particularly gainful or productive. Kingdoms would have been impossibly chaotic were the military aristocracy to continually fight against one another for the throne.
Status that is nonfungible, difficult and dangerous to extinguish, and temporally quite durable—this makes for a happy disincentive triangle whereby fortunes rose and fell due to a seemingly natural tendency. A good lord would be brave, cunning, and lucky, or wise, just, and lucky—some combination of character traits ensured success in this system. Those who succeeded correspondingly believed in this system, its justices and mercies.
New Believers
Political science and political economy were invented both at the dying age of the feudal system. A very new understanding of both governance and production were invented from the Renaissance to the First Industrial Revolution.
This was the contractual model of status. Status, due to the rise of Italian city states and cities in general, alongside political reinnovations like the oligarchic republic or commonwealth, the beginnings of constitutional monarchy, religious toleration, and the vast new swaths of land and wealth and bodies and goods to be extracted and shipped—all became divorced increasingly from the arrangement of conferred, title-based status. Wealth became abundant, wealth in coin more than wealth in souls, bushels, and acres.
This is old news. What’s most significant is that a new group of burghers, literate—educated, and able to promise and earn massive returns with fantastic new technologies and a self-understanding that exceeded whatever nobility had ever had for itself, rose up.
What Did They Believe?
Efficiency. Rationality. Profit. Organization. They were the first of a new species, Homo Economicus. The economic animal, who trucks, barters, and trades. They were certainly still Christians, but they had seen some other new, and positively greater revelation—the ability to organize and command men at impossible distances with an unimaginable reliability, all because they all wanted the same thing, and it was not some truly exhaustible, finite resource.
Metallic monetarists know today—gold is a limited commodity. Silver too. Your coinage and wealth is limited by how much bullion you hold. Smart traders know there’s a lot more promised in the market than there exists on Earth. Back then—they’d just found a new continent. 2, actually, and were soon going to find a third and get ready sea access to 2 others. They had no idea where the Nile’s headwaters were. They were just discovering Australia. Infinity and its nonreality didn’t quite matter—the world had become incomparably larger, and there was, suddenly, so much more of everything. It was a matter now of finding, categorizing, and exploiting.
The First Strivers, The First Boomers
The conquistadores are the ancestors of the PMC. Think about it! What did they do if not have to set up the first big trading companies in the world, divorced from noble oversight, so distant that the only thing that could keep the operation together was canny and effective rustling of personnel? Or at least, steady pay, confinement in a hostile land or on a boat with limited rations, promises of land titles, slaves, plunder and the threat of death if you didn’t rise to the occasion? The rise of the transatlantic empires created vast networks of entrepreneurialism and a transformation of trade patterns that is termed the global economy.
This was not of course how they saw themselves.
Napoleon Spreads Madness
Skipping ahead a bit, we see the first industrial revolution taking off in response to the massive accumulation of wealth, technical knowledge, and demand for more from this world that had grown so much more vast. It was accompanied by a profound disruption of the political order, as a class alliance was forcibly negotiated between the wealthy burghers and the aristocracy, whereby the rights and wealth of each could be tolerated.
Across this span of time, from the arrival of the Spanish in the New World—John Dee dreams up and wills the great Protestant Atlantic Empire into its slow and terrifying becoming. Louis XIV embarks on a process of organizing vast amounts of artistic talent with wealth and outlandish luxury, building the earliest known ancestor of Disney Land.
Homo Economicus Takes the Train
It wasn’t until the necessity of the old medieval brain, the desire and effectuality of plunder, slavery, and death as negative incentive all faded away that we come to see the quiet men in Scotland with their big Scotch brains thinking about who had come after the conquerors and explorers. Why were they all sitting at desks, counting money, running India from an office on the other end of the world, as John Stuart Mills’ father did.
The successors of those brutal and rapacious strivers had internalized some of this rapacity, but now had a very, very different set of concerns than the palace. And what’s more, they discovered the key enabling technology that for the first time since the invention of the printing press, nearly 300 years prior, would improve the reliability of information transmission. They not only had the telegraph, they now had the railroad.
The first industrial revolution was indeed the brainchild of economists and natural philosophers. It gave birth to the mills, the mines, and industry in general. But it was far more limited in its scope, reaching hardly outside of factory towns and the Lowell girls before it was succeeded by spatially distributed sites of production, linked by fast, reliable, seemingly inexhaustible power and a pace of discovery that is considerably more impressive than the current ‘tech boom’ of today.
Necessity Meets Belief
It must have been galling, at first, for the economically literate man to be bound by inefficiency. Each day the discoveries and potential of life seemed to grow—and with it, lost funds. If God had not meant for man to get rich, why had he made men like Rockefeller? Why let Andrew Carnegie live? The God of the Hebrews and Christians must have seen fit to not strike down Adam Smith for letting them have the idea!
The most frustrating thing then must have been the fact that they were not able to extract what they believed was proper—the due benefits of optimal order. And they were seeing it happening, in front of them, if only they could get at it. Railroads were running with astonishing efficiency. They had to run at astonishing efficiency. Every piece of land investment, every piece of rolling stock, had to run as intended, as close to a theoretical maximum. And so ownership structures, lines of delegation, effective communication structures to support command-and-control, and an overwhelming and quite new ethos of “By god we’ll get it done, god damn it!” became potent, real, and effective. They evolved out of necessity, a belief in order, a belief in human potential expressed via technology, and belief in economics. The managed corporation.
Owners, or Managers?
If Lex Luthor was real, he would likely not know all that much about the death ray, or the kryptonite island, or whatever it was he was using to kill Superman. He’d have some notion—let’s kill Superman, we should see how long that takes to get done.
Then, after going down and up the chain of planning and committee, his wishes would be before him, a few to choose from, and depending on some intrinsic fact of his demented character, he would act on a plan that would kill Superman.
In this sense, does Luthor have much agency? Is he running the show? Or is he closer to an id, or the business’ will to power? Related: what was John D Rockefeller like, actually, as a boss?
Probably less of a son of a bitch than you might think, though certainly still a son of a bitch.
Following closely and tightly with the railroad and the telegraph, a very potent social organization had emerged—the managed corporation. And its exemplar, the Standard Oil Trust would be formed not too much later in historic time—through exchanges of stock into holding corporations, laws against industrial combination were bypassed. Through consolidation and rationalization of production queues, prices dropped precipitously for oil byproducts, particularly the industrially essential kerosene. Only a few refineries pumped the stuff out, but at never-before-seen rates of profit and saturation.
The continual improvement in production rates, technology, profit margins, while of interest and belief alongside facility with these was necessary for success, it was not necessary for sustained success. Andrew Carnegie was not a master steelworker. He was not a technologist. John D Rockefeller was not an oil geologist, nor was he the manager of a refinery. Whatever his other qualities were, by the time of his old age, it is doubtful he could run a refinery effectively. What of the day-to-day campaign of status enlargement was he involved with? Who did run things? Did he actually know?
The formation of the limited liability corporation and the progressive codification of labor law in the 19th and early 20th century only enhanced this problem—the owner, or increasingly owners, were not personally liable for the consequences of their actions. Nor were owners in any way truly responsible as an efficient cause for whatever the corporate body they held ownership over did.
Instead, it was the managers. A bunch of salaried, statusless functionaries.
This was the second domino, after the effective managed corporate model was proven with the railroad. The rise of the managed corporation made a mimetic cascade inevitable. This process of imitation, improvement, and imitation, whereby the managers of a corporation succeeded to all effective authority in business—its creative and static activities—was now a necessity should the form of the corporation continue to survive in a competitive environment.
Again, It Was Competition
Now, it is the Gilded Age. Post-Civil War America, and the managed corporation has wrapped its tentacles across the breadth of the continent, snaked its way into the arteries of industry, taken hold of its inputs and it holds power, power like you wouldn’t believe.
After a period of entry and establishment, which is highly competitive, the ownership class ascends to a lofty realm of non-exclusive, almost friendly competition, not dissimilar from the nobility of old. It is a superior sort in many ways, because there is high selective pressure. It is competitive, in that maintaining wealth and power in a world of contract requires constant activity—which due to its superhuman demands, is delegated to an aggregate body of humans, collectively superhuman, this being the corporation.
The World of the Contract
This is a world where wealth can disappear. It is a world where everything is fungible. The Standard Oil Trust could go bankrupt, it could run into crisis, it could explode, it could be bought and sold if John D Rockefeller wanted to run The University of Chicago or pay attention to philanthropy. It is equally a world where some clever snake, somewhere else, could drink Rockefeller’s milkshake, drink it right up, and leave him high and dry and with nothing at all. Nothing was written to be a certain way. Any favor bought could be bought by another, if more dearly.
This created immense social pressure amongst the owners to transcend competition. In other words, a competition to escape competition. This was the key driver behind the mimetic cascade of the managed corporation (albeit not necessarily its invention), the achievement of massive efficiency to squeeze and seize control of a market, ruin competitors, and establish a competitive advantage at all levels of a business vertical, and control over its horizontal scope.
The process was not so simple as finding a minimal efficient scale at which to run a business. Instead there had to be acute social pressure to compete, win, and go to heaven, the lofty world of the philanthropist billionaire. The differential rates of the adoption of the managed corporation—the dissociation of owner and manager roles can be seen in countries like, but different from the US, like the UK—and this differential rate of adoption produced a major skew towards the US as the inventor, early adopter, and evangelist of the managed corporate model. By the time of the next major social change, from the 1930s-1970s, the managers had long held the world in their grasp, because status competition among the elites of the world, the newly reconfigured class alliance of the nobility, politicians, and the ultrawealthy, had almost nothing to do with the daily affairs of the planet.