Today we are at the onset of a new technological era — the era of decentralized technologies. Decentralization is not just a shift in underlying technologies; it presents a major power shift. Many proponents of decentralized technologies argue that they bring back power to the people. Power that first got captured by warfaring governments and then alarmingly shifted towards profit-maximizing corporations is now on the brink of coming back to the individual. This power shift has been in the making for decades, but it is now driving by open technologies and ultimately free money. In this blog series we will follow that historic journey, shine light on common patterns and finally explore why and how everyone — private individuals and giant corporations alike — should utilize decentralized technologies.
At least to the economically-inclined reader, decentralization is much less obvious or useful than common blockchain narratives would have us believe, so let us start by diving into the underlying logic of centralization that is driving the primary and centuries-old narrative of corporate success stories.
We apes are delicate beings — so delicate that most of our family members are extinct by now. But we have learned how to team up and cope with being born fairly useless compared to other species, how to defend ourselves in small communities and how to build shelters maintaining our narrow comfort zones. Even chimpanzees, our closest relatives in the animal kingdom, are not just able to cooperate for food; they also have elaborate social hierarchies. Indeed, dominant apes have been recorded monopolizing food sources and stealing food that their peers worked for.
Although most of our predecessors lived in families and small groups already several million years ago, larger and more powerful communities are a more recent invention. Only our homo sapiens species, which appeared about 200,000 years ago, has a sufficiently large brain to manage larger social groups of up to ~150 people. An increase in those early egalitarian hunter–gatherer communities developed early subsistence economies. Exchanging goods was certainly easier as language emerged about 100,000 years ago. Technical, organizational and social sophistication then allowed us to increase our Stone Age population from a catastrophic low of fewer than 10,000 survivors and to spread out of Africa and across most of the planet, so that, 12,000 years ago, our population reached a global 1.5–10 million, forming precursors of an exponentially advancing society.
The Bronze and Iron Ages of about 10,000 years ago brought us more advanced tools to feed a growing population and create modern societies. Beyond increasingly sophisticated tools, several small agricultural communities in Egypt turned into more and more powerful tribes that not only traded with one another but also developed written language and number systems around 3200 BC. This sophistication went hand-in-hand with the appearance of tribe leaders who — in contrast to the earlier egalitarian hunter–gatherer communities — were now in control of all resources and people in the Nile valley. Consolidation of the tribes crowned the first kings who established the agricultural, political and cultural capital of Memphis. Centralization increased the efficiencies, power and wealth of these kings and allowed them to erect monumental buildings such as the Great Pyramid of Giza in 2580 BC. Contrary to popular belief, the pyramids were not built by slaves, although some form of forced labor and slavery did appear in Ancient Egypt.
While the Ancient Greeks and Romans were inventors of many modern technologies, arts and even democracy, they were also introducing mass slavery. At its peak, 30% of the population of Athens and 40% of the population in Rome were slaves. The Dark Ages following the decline of the Roman Empire made slavery habitual throughout Europe — in England, the number of slaves still made for about 10% of the total population around 1000 AD. The appearance of serfdom, however, started to blur the lines between slavery, forced labor and free peasanthood. Peasants were living as serfs in debt bondage with little more rights than common slaves. Sometimes freemen — which accounted for as little as 10% of the English population in the 11th century — became serfs by suppression, or poverty forced them to subdue themselves to the larger economies of their lords for protection and land.
Such power of larger and wealthier groups is generally the primary driver of centralization — economies of scale. Large-volume productions allow fixed costs to be spread over more units, which can then be sold at lower prices. Large corporations have more bargaining power in getting better deals than smaller ones and industrial mass production allows for optimizations that are not achievable for artisan craftsmen. Examples of economies of scale leading to centralization and ultimately a winner-takes-all outcome can be found across global political and economic history.
The Venetian Arsenal, the first large-scale industrial enterprise employing more than 15,000 people, was outpacing its naval competitors long before the onset of the first Industrial Revolution. Its ground-breaking mass-production facilities allowed the building of a vessel a day — instead of taking months, as was the norm in the rest of Europe. The efficiency of the Venetian Arsenal was a major factor in allowing the Venetian Republic to economically and politically control the Mediterranean in the 15th century, despite its facing a much bigger Ottoman Empire, long before industrialization became popular elsewhere.
The first Industrial Revolution began in Britain with inventions such as the steam engine, the gas light and automated textile manufacturing. This did not just lead to more efficient production of goods; it also brought the first mega companies with severe powers. The British East India Company was granted rights by the King to collect not just taxes but also mint money, as well as to make war and peace and exercise jurisdiction beyond its trade activities. Just like its Dutch counterpart, the British East India Company privatized warfaring monopolies of previously unimaginable size. While the Dutch East India Company had a total of 50,000 employees worldwide in the 18th century, the British company was invading and ruling large parts of the Indian subcontinent with a private army of up to 280,000 men in the 19th century.
European industrialization did not just enslave faraway countries; never in history did the working class work longer hours than during the Industrial Revolution, enabled by gas lamps that were for the first time extending working hours into the night. The worker’s life was barely better than that of the previously officially enslaved generations, with few pleasures and little luxury.
It was only with the second Industrial Revolution’s mass production that the middle class became able to participate in the wonders of technology. Standardized assembly lines with automated toolings brought down the price of, for instance, the Ford Model T so much that the car was finally accessible to the U.S. middle class. Continuous optimizations dropped the price by another 50% within 10 years of production, and at the peak of productivity in 1925, the Runabout model cost a mere $290 — about $4,000 corrected for inflation at today’s price levels. It was ultimately government intervention that stopped the excesses of private warfaring companies conquering and exploiting entire countries in East Asia. Legal interventions started bringing some workers’ rights and reduced the intense industrial working hours.
It would have been impossible for any smaller seafaring nation to seize control over Venetian trade routes in the 15th century or the Dutch or British East India Companies in the 18th and 19th century, just as it would have been hard for small competitors to compete against Ford and their Model T in the 20th century. Economies of scale lead to winners that are far superior to smaller ones — or those that simply have not yet figured out how to scale. It is then not uncommon to see one far superior single winner that centralizes all gains, keeps growing on that basis and thereby makes it even harder for competitors to obtain any meaningful market share. A monopoly of countries or companies is commonly seen in competitive markets where technological progress and economies of scale have taken off.
The development from hunter–gatherer towards a modern Starbucks-coffee-drinking millennial with an iPhone was facilitated by technological advancement. But it also went hand-in-hand with increasing the size of societies/organizations/companies and by building structures in which the individual is an increasingly replaceable unit that carries little value. The actual contributing individual usually also gets decreasing ownership in the organizational structure. While the hunter-gatherer had 100% ownership of their own meal, our millennial working in Starbucks and creating content on Instagram is not a shareholder of either company.
The shift from self-sufficient hunter–gatherers to enslaved or suppressed workers without a voice is one of centralization. Governance centralization seems to be a primate instinct that is kept in check only by carefully balanced societies and legal ecosystems. Even in today’s first world, we can vividly see corporate and governmental organization and control mechanisms getting out of hand and being abused by selfish interests. Counting on government interventions to limit the powers of companies and their leaders driven by a primate instinct to use their power for their personal benefit is therefore a risky undertaking. That is the very starting point of decentralized technologies, which we will dive into next time.
Source: Crypto New Media