Three capitalisms: yeoman, corporate, and supercapitalism

I’m going to put forward the idea, here, that what we call capitalism in the United States is actually an awkward, loveless ménage à trois between three economic systems, each of which considers itself to be the true capitalism, but all three of which are quite different. Yeoman (or lifestyle) capitalism is the most principled variety of the three, focused on building businesses to improve one’s life or community. The yeoman capitalist plays by the rules and lives or dies by her success on the market. Second, there’s the corporate capitalism whose internal behavior smells oddly of a command economy, and that often seeks to control the market. Corporate capitalism is about holding position and keeping with the expectations of office– not markets per se. Finally, there is supercapitalism whose extra-economic fixations actually render it more like feudalism than any other system and exerts even more control, but at a deeper and more subtle level, than the corporate kind.

1. Yeoman capitalism (“the American Dream”)

The most socially acceptable of the American capitalisms is that of the small business. It’s not trying to make a billion dollars per year, it doesn’t have full-time, entitled nonproducers called “executives”, and it often serves the community it grew up in. It’s sometimes called a “lifestyle business”; it generates income (and provides autonomy) for the proprietor so as to improve her quality of life. When typical Americans imagine themselves owning a business, and aspiring to the freedom that can confer, yeoman capitalism is typically what they have in mind: something that keeps them active and generates income, while conferring a bit of independence and control over one’s destiny.

Yeoman capitalism is often used as a front for the other two capitalisms, because it’s a lot more socially respected. Gus Fring, in Breaking Bad, is a supercapitalist who poses as a yeoman capitalist, making him beloved in Albuquerque.

The problem with yeoman capitalism is that, not only is it highly risky in terms of year-by-year yield, but there’s often a lack of a career in it. Small business owners do a lot more for society than executives, but get far less in terms of security. An owner-operator of a business that goes bankrupt will not easily end up with another business to run, while fired executives get new jobs (often, promotions) in a matter of weeks. Modern-day yeoman capitalism is as likely to take the form of a consulting or application (“app”) company as a standalone business and may have more security; time will tell, on that one.

While yeoman capitalism provides an attractive narrative (the American Dream, in the United States) it does not provide job security for anyone (and that’s not its goal). It also has a high barrier to entry: you need capital or connections to play. Even though it is a more likely path to wealth than the other two capitalisms are for most people, it often leads to horrible failure, because it comes with absolutely no safety net. It’s the blue-collar capitalism of working hard and hoping that the market rewards it. Sometimes, the market doesn’t. Most people can’t stomach the income volatility of this, or even amass the capital to get started.

2. Corporate capitalism (“in Soviet Russia, money spends you”)

Corporate capitalism provides much more security, but it has an institutional command-economy flavor. People don’t think like owners, because they’re not. Private-sector social climbers rule the day. It’s uninspiring. It feels like the worst of both worlds between capitalism and communism, with much of the volatility, insecurity, and greed of the first but the mediocrity, duplicity, and disengagement associated with the second. It has one thing that keeps it going and makes it the dominant capitalism of the three. It has a place for (almost) everyone. Most of those places are terrible, but they exist and they don’t change much. Corporate capitalism will give you the same job in California as you’d get in New York for your level of “track record” and “credibility” (meaning social status).

The attraction of corporate capitalism is that one has a generally good sense of where one stands. Yeoman capitalism is impersonal; market forces can fire you, even if you do everything right. Corporate capitalism gives each person a history and a personal reputation (resume) based in the quality of companies where one worked and what titles were held. At least in theory, that smooths out the bad spells because, even though layoffs and reorganizations occur, the system will always be able to find an appropriate position for a person’s “level”, and people level up at a predictable rate.

Adverse selection is one problem with corporate capitalism. People choose corporate capitalism over the yeoman kind to mitigate career risks. People who want to off-load market risks might be neutral bets from a hiring perspective, but people who want to off-load their own performance risks (i.e. because they’re incompetent slackers) are bad hires. Corporate capitalism’s “place for everyone” makes it attractive to those sorts of people, who can trust that social lethargy, in addition to legal issues, around decisions that adversely affect one’s career (i.e. actually demoting or firing someone) will buy them enough time to earn a living doing very little. Consequently, it’s hard to operate in corporate capitalism without accruing some dead weight. Worse yet, it’s hard to get rid of the deadwood, because the useless people are often the best at playing politics and evading detection. Companies that set up “fire the bottom 10 percent each year” policies end up getting ruined by the Welch Effect: stack ranking’s most common casualties are not true underperformers, but junior members of macroscopically underperforming teams (who had the least to do with this underperformance).

Compounding this is the fact that corporations must counter-weigh their extreme inequality of results (in pay, division of labor, and respect) with a half-hearted attempt at inequality of opportunity (no playing of favorites) but what this actually means is that the most talented can’t “grade skip” past the initial grunt work, but have to progress along the slow, pokey track built for the safety-seeking, disengaged losers. They don’t like this. They want the honors track, and don’t get it, because it doesn’t exist– grooming a high-potential future leader (as opposed to hiring one from the outside and then immediately reorg-ing so no one knows what just happened) is not worth pissing off the rest of the team. The sharp people leave for better opportunities. Finally, corporations tend over time toward authoritarianism because, as the ability to retain talent wanes, remaining people that the company considers highly valuable are enticed with a zero-sum but very printable currency– control over others. All of this tends toward an authoritarian mediocrity that is the antithesis of what most people think capitalism should be.

Socialism and capitalism both have a Greenspun property wherein bad implementations of one generate shitty forms of the other. Under Soviet communism, criminal black markets (similar to that existing for psychoactive drugs in the U.S.) existed for staid items like lightbulbs, so this was a case of bad socialism creating a bad capitalism. Corporate capitalism has a simliar story. Corporations are fundamentally statist institutions that operate like command economies internally. In fact, if one were to conceive as the multi-national corporation as the successor to the nation-state, one could see the corporation as an extremely corrupt socialist state. What is produced, how it is produced, and who answers to whom, all is determined centrally by an autocratic authority. Advancement has more to do with pleasing party officials than succeeding on a (highly controlled) market. Corporations do not run as free markets internally; but also, once they are powerful and established, they work to make society’s broader market less free, pulling the ladder up after using it.

3. Supercapitalism! (“You know what’s cool? Shitting all over a redwood forest for a wedding!”)

Supercapitalism is the least understood of the three capitalisms. Supercapitalists don’t have the earnestness of the yeoman capitalist; they view that a chump’s game, because of its severe downside risks. They also don’t have the patience for corporate capitalism’s pokey track. Supercapitalists rarely invest themselves in one business or product line; having a full-time job is proletarian to them. Instead, they “advise” as many different firms as they can. They’re constantly buying and selling information and social capital.

Mad Men is, at heart, about the emergence of a supercapitalist class in professional advertising. Don Draper isn’t an entrepreneur, but he’s not a corporate social climber either. He’s a manipulator. The clients are the corporate capitalists playing a less interesting game than what is, in the early 1960s, emerging on Madison Avenue– a chance to float between companies while cherry-picking their most interesting or lucrative marketing problems. The ambitious, smart, Ivy Leaguers are all working for people like Don Draper, not trying to climb the Bethlehem Steel ladder. What’s attractive about advertising is that it confers the ability to work with several businesses without committing to one. Going in-house to a client (still at a much higher level than any ladder climber can get) is the consolation prize.

One interesting trait of supercapitalism is that it’s generally only found in one or two industries at a time. Madison Avenue isn’t the home of supercapitalism anymore; now, advertising is just the unglamorous corporate kind. Investment banking took the reins afterward, but is now losing that; now it’s VC-funded internet startups (many of which have depressingly little to do with true technology) where supercapitalist activity lives. Why is it this way? Because supercapitalism, although it considers itself the most modern and stylish capitalism, has a fatal flaw. It’s obsessed with prestige, and prestige is another name for reputation, and so it generates reputation economies (feudalism). It can’t stay in one place for too long, lest it undermine itself (by developing the negative reputation it deserves, and therefore failing on its own terms).

Supercapitalism also turns into the corporate kind because its winners (and there are very few of them) get out. First, they establish high positions where they participate in very little of the work (to avoid evaluation that might prove them just to have had initial luck). They become executives, then advisors, then influential investors, and then they move somewhere else– somewhere more exciting. That leaves the losers behind, and all they can come up with are authoritarian rank cultures designed to replicate former glory.

Why does supercapitalism generate a reputation economy? That fact is extremely counterintuitive. Supercapitalism draws in some of the most talented, energetic people; and it is often (because of its search for the stylish) at the cutting edge of the economy. So why would it create something so backward and feudal as a reputation economy, which intelligent people almost uniformly despise? The answer, I think, is that supercapitalism tends to demand world-class resources in both property (capital) and talent (labor). A regular capitalist is not nearly as selective, and will take an opportunity to turn a profit from property or talent, but the sexiest and most stylish capers require top-tier backing in both. If you’re obsessed making a name for yourself (and supercapitalism is run by the most narcissistic, who are not necessarily the most greedy, people) in the most grandiose way, you don’t just need to hit your target; you also need the flashiest guns.

Right now, the eye of the supercapitalist hurricane is parked right over Silicon Valley. Sean Parker is the archetypical supercapitalist. He’s never really succeeded in any of his roles (that’s a prolish, yeoman capitalist ideal) but he’s worth billions, and now famous for being famous. While corporate capitalism focuses on mediocrity and marginalizes both extremes (deficiency and excellence) supercapitalism will always make a cushy home for colorful, charismatic failures just as eagerly as it does for unemployable excellence.

Supercapitalism will, eventually, move away from the Valley. Time will tell how much damage has been done by it, but considering the state of the housing market there and the horrible effects of high house prices on culture, I wouldn’t expect the region to survive. Supercapitalism rarely considers posterity and it tends to leave messes in its wake. 

The final reason why supercapitalism must move from one industry to another, over time, is that reputation economies deplete the opportunities that attract talent. It’s worthwhile, now, to talk about compensation and how they work in the three capitalisms. Doing so will help us understand what supercapitalism is, and how it is different from the corporate kind.

Under yeoman capitalism, the capitalist is compensated based on exactly how the market values her product. No committee decides what to pay her, and she is never personally evaluated; it’s the market value of what she sells that determines her income. Most people, as discussed, either can’t handle (financially or emotionally) this volatility or, at least, believe they can’t. Corporate capitalism and supercapitalism, on the other hand, tend to pre-arrange compensation with salaries and bonuses that are mostly predictable.

Of course, what a person’s work is worth, when that work is abstract and joint efforts are complex and nonseparable, has a wide range of defensible values. Corporate capitalism settles this by setting compensation near the lower bound of that range, but (mostly) guaranteeing it. If you make $X in base salary, there’s usually a near-100-percent chance that you’ll make that or more in a year (possibly in another job). Since people are compensated at the lower bound of this range, this generates large profits at the top; in the executive suite (above the effort thermocline) something exists that looks somewhat like a less mobile and blander supercapitalism.

People who want to move into the middle or top of their defensible salary ranges won’t get it in corporate capitalism. The work has already been commoditized and the rates are already set, and excellence premiums are pretty minimal because most corporations refuse to admit that their in-house pet efforts aren’t excellent. Thus, talented people looking for something better than the corporate deal find places where the opportunities are vast, but also poorly understood by the local property-holders, allowing them to get better deals than if the latter knew what they had. At one time, it was advertising (cutting-edge talent understood branding and psychology; industrial hierarchs didn’t). Then it was finance; later and up to now, it has been venture-funded light technology (on which the sun is starting to set). Over time, however, the most successful supercapitalists position themselves so as not to be affiliated with a single one of the efforts, but diversify themselves among many. This creates a collusive, insider-driven market like modern venture capital. Over time, this inappropriate sharing of information turns into a full-blown reputation economy.

Once a reputation economy is in place, talent stops winning, because property, by its sheer power over reputations, has full authority to set the exchange rate between property and talent. “The rate is X. Accept it or I’ll shit on your name and you’ll never see half of X.” Once that extortion becomes commonplace, what follows is a corporate rank culture. It feels like the arrangements are “worked out” and only management can win– and that’s actually how it is. Opportunities don’t disappear entirely, but they aren’t any more available to young talent than elsewhere, and the field becomes just another corporate slog. That’s where the VC-funded technology scene will be soon, if not already there. 

Supercapitalists, I should note, are not always the same people as “top talent” and they’re rarely young (i.e. hungry and unestablished) talent. Supercapitalists tend to be the rare few with connections to both property and talent at the highest levels of quality. Property they can carry with them, but talent they must chase. Talent arrives in the new place (quantitative finance, internet technology) first. Supercapitalism emerges as these well-connected and propertied “carpetbaggers” arrive, and as the next wave of young talent discovers that there are better opportunities in managing the new place (i.e. associate positions at VC firms) than working there. 

What really impels young talent to join supercapitalism is not the immediate opportunity (which is tapped out) but the possibility to move along with supercapitalism to the next new place. For example, someone who started in investment banking in 2006 is not likely to be a million-per-year MD today– that channel’s clogged– but has has a good chance of being rich, by this point, if he jumped on the venture capital bandwagon around 2007-08; he’s a VC partner on Sand Hill Road now. 

Interactions

How do these three capitalisms interact? Is there a pecking order among them? How do they view each other? What is the purpose of each?

Yeoman capitalism provides leadership opportunities for the most enterprising blue-collar people, and is the most internally consistent. It’s honest. Unlike the other capitalisms, there isn’t much room for reputation (much less prestige) aside from in one’s quality of product. The rule is: make something good, hope to win on the market. The major problem with it is its failure mode, even in good-faith business failures that aren’t the proprietor’s fault. The main competitive advantage one holds as a small business owner is property rights over a company, and one who loses that is not only jobless, but often with limited transferability of skill.

Yeoman capitalism has a lot of virtues, of course. It gives a lot back to its community, while corporate and supercapitalism tend to destroy their residences and move on. Yeoman capitalism is what blue-collar people tend to think of when they imagine capitalism as a whole, and it provides PR for the corporate capitalists and supercapitalists, who recognize that their reputations (which they hold dear) depend on the positive image that yeoman capitalism provides for the whole economic system. Yeoman capitalism is aware of corporate and supercapitalist entities in the abstract, but has little visibility into their inner workings. Most small businessmen probably know that the corporations are somewhat different from their enterprises, but not how different (in reality, living within two separate societies) at the upper levels.

Corporate capitalism provides social insurance, although with great degrees of inequity based on pre-existing social class. It’s socialism as it would be imagined by a self-serving, entitled upper class refusing to give up any real power or opportunity. It can make little meaning out of leadership, charisma, or unusual intellectual talent. In fact, it goes to great lengths to pretend that these differences among people don’t exist. Its goal is to extract some labor value from people who lack the risk tolerance for yeoman capitalism and the talent for supercapitalism, and it does so extremely well, but it also creates a culture of authoritarian mediocrity that renders it unable to excel at anything. Needs for high quality are often filled by yeoman or super-capitalism; because yeoman capitalism can provide the autonomy that top talent seeks while supercapitalism provides (the possibility of) power and extreme compensation, those capitalisms get the lion’s share of top talent. Regarding awareness, corporate capitalism understands yeoman capitalism well (it often serves yeoman capitalists) but is oblivious to the whims of supercapitalism.

Between corporate and yeoman capitalism, there isn’t a clear social superiority, because they serve different purposes. Some intelligent people prefer the validation and stability of corporate capitalism, while others prefer the blue-collar honesty of yeoman capitalism. On the other hand, a strong argument can be made that supercapitalism is the clear elite among the three. It’s built to take advantage of the freshest, just-being-discovered-now opportunities. 

Supercapitalism has a familiar process. First, the smartest people find opportunities (“before it was cool”) that the property-holders haven’t yet found a way to valuate, and negotiate favorable terms for themselves while they can, and this makes a few thousand smart people very rich. Then, the elite property-holders catch wind of the deals to be made and move in. Soon there’s a rare confluence of two forces that usually dislike, but also rely heavily upon, each other– talent and property. Supercapitalism emerges as the all-out contest to determine an exchange rate between these two resources over a new domain comes into play. Eventually property wins (reputation economy) and corporatization sets in, while those who still have the hunger to be supercapitalists move on to something else.

A puzzle to end on

There’s a fourth kind of capitalism that I haven’t mentioned, and I think it’s superior to the other three for a large class of people. What might it be? That’s one of my next posts. For a hint, or maybe a teaser: the idea comes from evolutionary biology.

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21 thoughts on “Three capitalisms: yeoman, corporate, and supercapitalism

  1. Notice anything about the super capitalism industries:

    1) Advertising
    2) Financial Innovation
    3) Tech (social media)

    They are all extractive transfer industries that prey on human weaknesses. This is masked of course by the fact that they are, in some form, necessary. Products do need to be advertised. Capital does need to be raised and invested. The internet does create tremendous opportunities.

    The problem of course is that isn’t why top end talent was brought it. It wasn’t brought in to help improve the value of the product in the marketplace, but to pull a fast one on customers. Give a +3SD IQ person a spreadsheet and resources and his customers never had a chance. When smart people took over advertising it was to figure out how to develop myths and lies to try and make people think their deep problems could be solved with consumer purchases. When they took over finance it wasn’t to raise and deploy capital for productive purposes, but to invent complex derivatives their clients couldn’t understand so they could exploit tail risks and rip people off. And while tech is a better case then the former two, I’m not exactly convinced that 140 character tidbits and farmville are really what the finest minds out to be working on.

    The original supercapitalists were industrial magnates, and negative externalities aside (pollution) they at least made things that helped improve peoples lives. Some of them even gave back to the communities they lived in much like yeomen (which many of them came from). Todays supercapitalists act like assholes, burn down the economy to make themselves rich, but then figures its ok because they voted for Obama and sent a check to some third world country.

    • This is right on. One thing I would add. You said:

      “Todays supercapitalists act like assholes, burn down the economy to make themselves rich”

      Also worth mention is that they get themselves bailed out when they fail by creating elaborate dead-man-switch systems that evolve into too-big-to-fail monstrosities.

      • The idea of “too-big-to-fail monstrosities” is flawed. The Second Bank of the United States was shut down by Jackson despite that same argument being applied. I only hear this argument from bankers. Nothing is too big too fail. In fact, certain big “capitalist” (not) entities like the Federal Reserve are best left to failure or better yet, put to failure just as The Second Bank was as they are essentially, the same type of institution with the same devastating effect.

  2. “It’s socialism as it would be imagined by a self-serving, entitled upper class refusing to give up any real power or opportunity.”

    In other words, it’s socialism as seen practiced in the real world for the last hundred or so years as all socialism refuses to give up real power or opportunity except to the elite class by definition.

    4ht kind of capitalism guess:
    Cancerous capitalism that spreads simply for its own sake, not on any merits or usefulness to market, eating other capitalist entities till it is the sole survivor (monopoly) or close to it (oligopoly). Defense contractors come to mind as does the actual defense department. Interesting how all our governmental institutions themselves are money making corporate capitalist machines as well. So much for the separation of capitalism and socialism.

  3. I sort of disagree on Yeoman capitalism being risky. Due the internet, there isn’t too much capital required to get started which mitigates the financial risk considerably. Also developing a skill set in finding needs, building products, customer development, creating systems, etc. is something that is quite portable and can lead to a “career” as an entrepreneur if the market shifts.

    • The low(er) capital intensity of internet businesses is certainly lower, but there is also the opportunity cost of foregoing a corporate capitalist job which usually may pay a higher, or at least more stable, rate. Since we’re talking about a failure mode here, the ‘stable’ life-sucking corporate job wins from a purely financial perspective.

      It is the combination of higher variance, financial opportunity cost and reputation costs of failure of yeoman capitalism that makes it risky. Also, internet businesses aren’t the only ones that yeoman capitalists will gravitate towards; surely many more small businesses are more capital intensive.

  4. Right up your alley..

    http://linux.slashdot.org/story/13/07/15/2316219/kernel-dev-tells-linus-torvalds-to-stop-using-abusive-language

    The entire thread is worth a read, but Linus isn’t buying it: “Because if you want me to ‘act professional’, I can tell you that I’m not interested. I’m sitting in my home office wearing a bathrobe. The same way I’m not going to start wearing ties, I’m *also* not going to buy into the fake politeness, the lying, the office politics and backstabbing, the passive aggressiveness, and the buzzwords. Because THAT is what ‘acting professionally’ results in: people resort to all kinds of really nasty things because they are forced to act out their normal urges in unnatural ways.’

  5. Nice piece on Supercapitalism and Supercapitalists. Have a look at our movie if you get a chance. It’s a small indie film on a tight budget that got some decent exposure.

    $upercapitalist trailer: http://bit.ly/sctrailer

    $upercapitalist is a financial thriller about a New York hedge fund trader who is sent to Hong Kong orchestrate a hostile take over of a Hong Kong Tycoon’s enterprise. $upercapitalist launched August 10 in the USA across 10 major cities while simultaneously releasing on Video on Demand, iTunes and Amazon and other major platforms. The film stars HK juggernauts Kenneth Tsang(Die Another Day, Rush Hour 2) and Richard Ng(over 100 International and HK films), Golden Globe Nominee Linus Roache(Batman Begins, Law and Order), and newcomer Writer Actor Producer Derek Ting.

    The film has received acclaim amongst financial and global experts such as William Alden from New York Times Dealbook, Chrystia Freeland Global editor of Reuters “Tackles Capitalism and Identity” and Martin Fridson from Forbes “Life and art paralleled”. The film was also warmly received by Hong Kong with Lana Lam first writing about them in the SCMP, Apple Daily, Tinny Cheng from Hong Kong Economic Journal, Mercy Lo from The Standard, and Bernie Lo, CNBC’s top anchor.

    Links to Press:
    NY times http://bit.ly/scnytimes
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  6. $upercapitalist: Don’t spam. This is an obvious attempt at self-promotion. Btw, your film got a rotten score (only 18%) on RottenTomatoes.com.

  7. The VC + startups are only money machine form your perspective but you could also look at them from “startups as schools\ academy\ skills learning facility” aspect. It opens up 4 roads\ possibilities ( be entrepreneur) instead of just 3 (corporate job, government job, academic job)

    • That’s funny coming from techcrunch, whose “writers” have obviously not accomplished a passing grade in grammar, let alone an actual writing class. I suppose they’re trying to help others avoid their own mistakes.

  8. Capitalism in all of it’s variations is an incredibly inefficient method of distributing the potential productivity of the entire population to people born into disadvantaged subgroups. It is a naturally occuring economic system that is born of the obvious advantages of trading the specialties of individuals and groups amongst one another. It pays no regard to the unnatural and more abstract nature of a system that includes an inventory of assets and applying systems of logistics to meet the basic needs of the population as a whole. Capitalism is all about greed and fear. A more efficient system requires that people are not fearful about their potential short and long term survival and welfare. The reality of today’s societies is that people are fearful and many people seek only to amass wealth and power. It is in just such an environment that capitalism thrives.

    Over time I am confident that societies will evolve past the capitalist period and the general productivity of the totality of society will be edficiently shared across the world and will allow people born into poverty and much worse to not only survive but to thrive and contribute their own potential to the whole of the society.
    Dan

  9. I really like this taxonomy, and it reminds me of a classification that I inferred from your earlier posts, which is perhaps worth making explicit here: the stuff economy, the information economy, and the credibility economy (also known as “politics”). The stuff economy is just about goods and services; it deals solely with the supply and demand of tangible items (a good like a computer or a service like a haircut) and is the most important economy for a very small firm operating in a small, easily understood milieu. Competence in production is what is important in the stuff economy. The information economy traffics in answers to questions like: is there a new technique for manufacturing? Is my main competitor’s market share changing significantly? Is a new market, previously closed by government regulation, opening up? How is this employee performing? This economy incorporates the stuff economy and is more important as a company gets bigger, since now key information is dispersed and not universally known. I once read the description of the job of a producer’s assistant in Hollywood which was the perfect expssion of the information economy. This person was tasked with finding particular items for a movie shoot and made a point of saying that he did not need to know what they actually were or did; he just needed to know what their names were and who were the players, and he reliably found the needed stuff at good prices. A lot of financial trading is about the information economy; the details of how to create the stuff is mostly irrelevant. Then there is the credibility economy; once an economy is big enough, there are different opinions about important information, so scarce attention has to be divied according to credibility. Prestige is one example of such a market, e.g., the rankings of U.S. News and World Report for universities. The credit markets, which theoretically measure the likelihood of a debtor (like a corporation or a government) to repay debts is another example. (This is the market in which credit default swaps, which became so infamous after the financial crisis, trade.) Companies recognize the importance of brand management precisely because they know how valuable credibility is. And as you have so eloquently described, the credibility market is just that: a market, in which credibility can be bought or sold in exchange for something’s else (including someone else’s credibility).

    Note that as abstraction increases, so does scalability. Being able to produce stuff is usually limited in scope (with possible exceptions made because of leverage afforded by technology, e.g., writing software that gets used everywhere). Information is much easier to transmit and understand, and at least in the short term, is much more valuable than actually making stuff, so it is more scalable. But the clock is always ticking; at some point the information is obsolete, so often people turn to trusted, credible sources whom they think can be relied upon to keep up with the situation and know what information to trust. Credibility scales most easily. For example, knowing how to make Coca-Cola is specialized and has limited reach; not many people will ever be able to do it (among other things, since the formula is a trade secret), and without lots of information about competitors, distribution, advertising, etc., and lots of credibility, such knowledge would never threaten Coca-Cola’s position. Information about the market is easier to understand and has more potential impact. But credibility (like having many customers chanting the slogan “Coke is it!”) can be understood by absolutely anyone and is ultimately what influences buying behavior.

    In practice, these three economies (especially the latter two) blend and recurse among each other. Once all three economies are important, then meta-effects kick in. Now there is not just information about the market, but information about someone’s credibility. And then there is the question of the credibility of the information of someone’s credibility. And so on, ad infinitum (or at least, until people get tired of thinking and just want to make a decision). Business becomes increasingly divorced from the actual nuts and bolts of production, which is why many successful CEOs of large enterprises do not need to know much at all about the details of the business. They just need to know how to read people, know when to make introductions, know who the right people are to call to a meeting, how to manage large organizations, etc. An interesting case is Sculley’s tenure at Apple; his lack of familiarity with the computer business ultimately led to his (and temporarily, Apple’s) downfall, but just think how the former head of Pepsi could ever even be consider for the position in the first place: it was because he knew how to build brands.

    The three economies outlined above, like your three categories of capitalism — yeoman, corporate, and super — correspond to increasing scales. And perhaps for this reason, new workers often take time to understand the significance of the more scalable versions. Many recent graduates think that what is important in work is productivity. At some point, they get blindsided and realize how important current information is. Still later, they see actual cases where bad decisions are made, even though the correct solution was on the table; inevitably, the reason is a “market failure” in the credibility market.

    The volatility of the three markets varies tremendously. The stuff market is usually governed by trends and is, at least in many businesses, not so volatile, with exceptions like the movie business. The information market is usually quite volatile, since there is always some new piece of information, either an opportunity or a crisis, that is happening. But the credibility markets are notoriously sticky; once a reputation is made, it can be very difficult to change, since it is such a laborious process (often without really sufficient information) to reevaluate someone’s deserved position in the pecking order and make all the consequential changes. And of course, reevaluating credibility all the time is bad for morale. A lot of what mystified me when I was younger makes sense in light of the extreme lack of volatility in the credibility market.

    How the yeoman/corporate/super and stuff/information/credibility categorizations correspond is not entirely clear to me at this point, but at first blush, they seem very roughly analogous.

    • This is an interesting reply, and I’m not sure I can fully do it justice, but let me share some thoughts…

      Information is nearly freely replicable, so it doesn’t have the same laws as what you called the stuff economy. Commodity goods and services have a legible value and purpose.

      Information is often a lot *more* valuable in absolute magnitude, and also hard to destroy. The problem with it is that there’s a lot of garbage information out there that has negative value. It takes high-level skills (and meta-information) to filter the good apart from the bad.

      Credibility and reputation are memoized metadata attached to sources of information as well as products and services. Discovering what’s good in the world is hard and painful (just imagine all the primitive people who died trying out unknown plants to find the edible ones) so, over time, people build systems for collecting that information.

      Yeoman capitalism tends to focus on product and service quality. Reputation matters, but the sense is that delivering high-quality stuff will let reputation take care of itself. Reputation is earned, not bought or traded (something yeoman capitalists find dishonest, but corporate and super-capitalists have no problem with). Yeoman capitalists don’t believe in gaming reputation systems or see reputation as an end in itself.

      The other two capitalisms are largely about reputation management. It’s brand (reputation) that makes corporations bring in money so easily while lone agents would struggle. The difference seems to be in how they handle personal reputation. Corporate capitalism is about the Gervais/MacLeod risk transfer with the people at the bottom getting anonymity and a certain insurance against reputation problems. (You don’t have to have a personal reputation to get and keep a low-level corporate job.) Of course, if you develop any kind of internal reputation (even a good one) you put that job security in danger.

      Supercapitalism seems to be where a certain set of people who surpass a corporate escape velocity end up. It’s for people who are really good at the corporate game of managing and developing reputations, but who also put such a focus on personal reputation/connections that they become formidable.

      Supercapitalists are hackers, in essence, but of human systems. As with computer hacking, there are white-hat, gray-hat, and black-hat hackers among them.

  10. Pingback: Gervais / MacLeod 26: r- and K-selection in organizations and capitalism. | Michael O. Church

  11. Pingback: Link Banana » r-/K-selection in the Economy

  12. I would argue that VCs and “rubbish”-in-residence folks at these VC firms are in the same category as supercapitalists, albeit a more sub/inferior type. Seen enough of these “rubbish”-in-residence types jumping around startups to make me sick of the type of equity, compensation and influence these types demand.

  13. Pingback: Software engineer salaries aren’t inflated– at least, not for the 99% | Michael O. Church

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