This is part 1 in a 2-part series about the ideas in World After Capital, written by Albert Wenger, a General Partner at Union Square Ventures. The book is available for free here & Wenger summarized his theses in a shorter synthesis here.
I first learned about World After Capital listening to Wenger discuss his views with Patrick O’Shaughnessy, and have continued to be intrigued by the historical breadth of the ideas, their implications, motivations, and cautions.
Part 1 will introduce Wenger’s key points at a high-level, and Part 2 will examine a couple of the less intuitive arguments that underpin the book’s primary ideas.
Wenger’s Starting Assumption
Wenger’s starting assumption is that there have been several major convulsions in human history that have led us from hunting and gathering to machine intelligence.
For a long, early stretch in our history, human life was driven and defined by food & water scarcity. During this era, the human experience was in large part centered around foraging.
Then came the first major convulsion, agriculture, which catalyzed more permanent settlements, expanding populations, and the domestication of plants and animals. For ~12,000 years, human civilization existed against an agrarian foundation, and it was not until ~1800 that the second major convulsion occurred.
This time catalyzed by the mechanization of separating cotton fibers from their seeds, the industrial revolution emerged in Britain as the offspring of globalizing trade following the Renaissance, and humanity made a big leap into a new age of mechanization (industrial era).
Industrialization paired with capitalism (industrial capitalism) gave rise to major international corporations which needed huge quantities of labor to produce and distribute goods and services.
Therein evolved a relationship between those who owned capital (e.g. factory owners) and those who supplied labor (e.g. workers). This is the period we largely continue to live within, and it’s a period that ushered in exponential change.
One interesting way to think about the changes driven by industrial capitalism is through the lens of GDP.
This graph was created by U.C. Berkeley professor Bradford Delong and introduced to me by a friend during a history of capitalism course I took several years ago. It highlights that for much of human history, our collective GDP was flat to negative (the decline in the chart above in the 14th century was the Plague). Then, around the turn of the 18th century, GDP exploded and has been on an exponential growth curve ever since.
Wenger’s Core Argument
World After Capital imagines how the relationship between capital and labor has already been, and will continue to be, altered by accelerating advances in digital technology.
He believes the emergence of machine computation and digital technology have catalyzed the third major convulsion in human history, arguing that we’re transitioning into a new era that he refers to as the knowledge era.
The scaffolding of Wenger’s argument consists of 6 core points, each with its own important implication:
The industrial era is ending —> We are in a moment of transition "as profound as the one which took humanity from the Agrarian Age to the Industrial Age."
This end is being brought about by digital technology —> Digital technology possesses two traits that are new to the human experience: 1) zero marginal costs; and 2) universality (e.g. machine intelligence).
Digital technology is driving humanity towards a new age, the Knowledge Age —> Transitional moments of this scale are prone to extreme upside, but also extreme downside.
In the industrial era, capital was scarce. In the knowledge era, attention is scarce —> Digital technology is shifting scarcity from capital to attention. This is one of the great successes of capitalism; that it has made capital significantly less scarce in parts of the world. But it is also core to one of the great risks of the future.
One of the most significant risks we face is a crisis of attention. —> We are not paying enough attention to profound challenges, such as “what is our purpose?” and “how do we overcome the climate crisis?”
Market capitalism alone is ill-equipped to reallocate attention from an industrial job loop to the knowledge loop, because prices don't exist for redirecting our attention. —> To make attention less scarce, we will need new policies that expand three individual freedoms: 1) “economic freedom via UBI; 2) informational freedom via broadening access to information and computation; and 3) psychological freedom via practicing and encouraging mindfulness.”
Questions
These points require some grappling with.
For example, how do we substantiate the assumption that we’re not paying enough attention the world’s profound challenges; that there really is a crisis of attention?
Another major question is why the (effectively) zero marginal costs of digital technology would have such a transformative effect on the economy as a whole.
Does this imply that the zero marginal cost of digital technology will see most companies in the future more closely resemble Whatsapp in terms of labor force vs. valuation (e.g. employed 50 people when acquired by Facebook for $19B)?
In a brief scan of employee count across well-known large corporations, it’s not clear that zero marginal costs are yielding shrinking employee bases (at least not yet).
Though what may be happening is increasing revenue per employee, thanks to the acceleration of technology-enabled labor.
A friend who reviewed this post, wrote, “I understand the "software eats the world" idea, and think there's still a lot of efficiency to come in terms of distribution, but can many of the largest sectors of the US economy (and the largest parts of household budgets) benefit fully from zero marginal cost digital transformation?”
Part II
Wenger is concerned that we’re at risk to cling to the industrial era, which increases the chances of violence as the transition to the knowledge era unfolds.
One of his primary aims is to encourage policy that serves to reallocate attention from the industrial job loop to a 21st century knowledge loop.
Only in this reallocation can we produce the knowledge necessary to solve for the complexity of challenges associated with AI, global pandemics, peak population, climate change, polarization, internet centralization, and on and on.
In part 2, I’ll dive into 3 of Wenger’s most important underlying arguments:
that digital technology, because of its zero marginal costs and universality, will fundamentally alter the relationship between labor and capital.
that it is attention, not capital, that is most scarce both today, and in the future.
that within this transition we are already facing a crisis of attention.