The Lonely call of the 21st Century Luddite

Perfecting Equilibrium Volume One, Issue Nine

Some things are so big/They make no sense/Histories so small/People are so dense

The Sunday Reader, May 29, 2022

Web3 promises to restore the fortunes of photographers and writers, musicians and crafters – all of those who make their living in the Creator Economy.

If creators are Web3’s winners, who are Web3’s losers?

Yesterday’s elites – college-educated managers, MBAs and educators – are the New Luddites.

History is written by the victors. The history written by the victorious industrialists about the defeated rioters was such a slander that their very name – Luddite – has become a common term for fools who fear and don’t understand technology.

The Luddites didn’t fear technology. They feared that it would end their way of life. And they were right.

The Luddites were piece workers, skilled weavers and textile artists in what was literally a cottage industry. The factory looms produced cloth at such a rate that pieceworkers could not compete. The piece workers protested and tried to negotiate, but the owners of the new mills were uninterested in slowing their progress.

So the pieceworkers formed a secret society led by the mythical General Ludd. Factory after factory was sacked in 1811, their looms smashed with huge hammers named Great Enock after the blacksmith who had made both the hammers and the looms they destroyed. “Enoch made them,” they declared, “Enoch shall break them.”

As the looms put the pieceworkers out of work, they also cut deeply into the village economy. As village economies struggled and factories demanded more and more workers, rural England emptied out and was impoverished, and cities exploded.

Adam Smith explained that society renews itself through Creative Destruction: old inefficiencies are crushed and swept away by innovation. And it is impossible to argue that the Industrial Revolution was not enormously beneficial to society. People are living almost twice as long. Modern medicine has wiped out entire categories of diseases. And no 19th century prince or princess lived half as well as the modern middle class.

All of that was cold comfort to the Luddites of the 19th century. And it is now cold comfort to our 21st Century Luddites. Generations of elites have attended the best schools, walked their diplomas into the best management jobs, and lived the best lives.

No more.

The Iron Law of the Industrial Age was that Economies of Scale defeat everything else. So companies grew and grew, and required more and more management. And managers.

Economy of Scale is a simple concept we have all come to understand: A single craftsman is perfectly capable of making a knife or a jacket. But a factory is capable of making a hundred or so of equal or better quality for the same time and less money. So craftsmen such as the Luddites cannot compete on price and find it hard to compete on quality. The reasons for this are simple: because the factory is making hundreds of times as many items, it can buy bulk supplies at much cheaper rates. And because the factory is producing so many units, workers can specialize tasks on an assembly line, increasing specific skills, reducing labor costs and solving problems. The bigger the operation and the higher the production, the lower the cost of each unit.

The epitome of Economies of Scale was the Ford Rouge River Plant; 2000 acres in Dearborn, Michigan, 10 miles from Detroit on the Rouge River. Iron, silicon and a stream of raw materials flowed into the blast furnaces and glass plants, and finished Fords rolled out. More than a century after its founding the Rouge River Plant still churns out a new Ford every few seconds.

As the Information Age supersedes the Industrial Age gives way, its primary law - the Economies of Scale – gives way also, and with it all of the structures and procedures built on its architecture.

And as these give way, the millions who worked and lived there are swept away, their way of life vanishing, following the livelihoods of the Luddites into the recesses of history.

Managers and management are the New Luddites.

As hundreds of thousands gathered in Detroit to build cars, the flood of workers created entirely new classes of problems. Solving them called for a new kind of organization, launching the Era of Management Expertise, marked by the 1922 establishment of the Harvard Business Review.

Managers became the new elite. Generation after generation sent their children to the right schools, then into lucrative careers managing those armies of workers who had filled the cities.

Here’s the problem: Ford in 2020 has just under 200,000 employees, and a market cap of $27 billion.

Apple has around 45,000 employees (not counting the retail stores), and is worth almost $2 trillion.

Ford is a manufacturing company. Apple is a hybrid company. There is no Apple Rouge River Plant. But Apple does have thousands of employees managing outsourced manufacturing, supply chain, shipping, distribution and then managing all those processes.

If Apple is a hybrid company, what would an Information Age company look like? At some point in the next decade or so 3D printing will allow you to purchase a smartphone by downloading a design and printing it.

How many employees will Apple need if it is a website with designs you can purchase for downloading and printing? Certainly not 45,000. 4,500?

450?

Whatever the final number, tens of thousands of middle management jobs will disappear.

Companies with 450 employees don’t hire a lot of Wharton or Harvard MBAs. Companies with 450 employees don’t have dozens and dozens of employees in Human Resources or Legal. Small companies outsourcing vital functions such as payroll.

Why should you care about whether some silver-spoon fed Ivy League MBA’s job prospects?

The Industrial Revolution is called that because the transition transformed the world. Those millions of managers will no more fade quietly than the Luddites.

But there is hope, too. The Luddites lost their jobs, but that did not mean there were no more jobs. It took decades for all those management jobs to take shape. It will take decades to see what kind of jobs the Information Age brings us.

Web3 Digest for the week of May 23:

My Kind of Highroad Gone Wrong

There’s a lot of buzz about decentralized autonomous organizations, about how they usher in a new era of distributed democratic organizations and fundraising.

But there are several problems with this theory. For one, voting by token sounds an awful lot like voting by property owners, no? How much progress is a return to feudal times?

Worse, what does it say about any technology when the best example of its success is a massive failure?

But All I Got Is A Photograph...

How much will you pay for a photo of a sunset to illustrate a brochure you’re putting together? For many, the answer is $0. And photography – a business that has always chewed up eager newbies – has become an even more untenable way to make a living.

Half of the photographers surveyed for the State of Photography Report 2022 earned less than $40,000 annually. Almost a third earned less than $20,000. So it’s no surprise many had other jobs.

Other Substacks I recommend:

I’ve been a paid subscriber to Freddie deBoer for a year. Freddie claims to be a Marxist. Maybe so. He's a thoughtful writer on politics, culture, blogging and mental illness who likes data. Feola say check him out.

What I’m Reading

Few have read Walter Tevis, but three of his six novels became seminal movies: The Hustler, The Color of Money, and one of my all-time favorites, The Man Who Fell To Earth. I happened to run across another of his novels this week and it was fascinating. Mockingbird is the story of a super-intelligent cyborg who has turned suicidal, but cannot commit suicide while there are humans left in the world. It is a reverie on what it means to be human. Recommended.

What I’m listening to this week

Easter Eggs

Nothing will corrupt us/Nothing will compete/Thank god heaven left us/Standing on our feet

Some things are so big/They make no sense/Histories so small/People are so dense

Feola.Foto

Some military photos for Memorial Day

24th Infantry Division soldier stands guard, Ft. Irwin, CA 1894

And Finally…

Play Stupid Games, Win Stupid Prizes

Some headlines are so wonderful it’s pointless to read further; it can only be a letdown. And hey, do not we all fear the pantsdown threat? Omnipotent BMCs from Quanta remain vulnerable to critical Pantsdown threat