Paul Graham: A high-tech society

The High-Res Society (December 2008)

High-tech society
(for translation, thank you fantom)

Throughout most of human history, the success of a society has been determined by its ability to create large, disciplined organizations. The winners were those who bet on cutting costs by increasing production, which means that the largest organizations were the most successful.

Today, things have changed a lot, and it is hard to believe that just a few decades ago, the largest organizations were eager to be on the wave of progress. In 1960, an ambitious college graduate wanted to work in the huge, glittering offices of Ford, or General Electric, or NASA. Small business meant small business. Small in 1960 did not mean a cool start-up. That meant Uncle Sid's shoe store.

When I was growing up in the 1970s, the idea of a service ladder was still alive. The standard life plan was to go to a good college, after which, you could get an invitation to some organization and then climb the ranks. The more ambitious ones differed only in that they hoped to climb the ladder faster. [1]

But at the end of the twentieth century, something changed. It turned out that cutting costs through increased production was not the only force in industry. Particularly in technology, the advantage of speed that could be gained from small organizations began to outweigh the advantages of size.

The future is not what we expected in the 1970s. We thought about dome-covered cities and flying cars, but that didn't happen. Fortunately, we have workwear, skills, skills and specialty. Rather than being in the hands of a few giant, ramified organizations, the economy of the future will be a flexible network of small, independent units.

Of course, the big organizations have not gone anywhere. Most likely, such famous, successful organizations as the Roman Army, the British East India Company suffered from convention and intrigue, as modern companies of the same size. But they competed with opponents who couldn't change the rules on the fly using new technology. Today, the rule “big and disciplined organizations win” should be supplemented with “games where the rules change slowly.” No one knew it until the changes were fast enough.

Big organizations are losing out because they are not getting the best. Ambitious college graduates today don't want to work for a big company. They want to work for a fast-growing startup. If they are really ambitious, they start their own. [2]

This does not mean that big companies will disappear. When they say that startups will succeed, they imply that big companies will exist because a successful startup either becomes a big company or is acquired by a big firm. [3] But large organizations will probably never again play the leading role they played until the last quarter of the twentieth century.

Unexpectedly, the trend that has been going on for so long has stopped. How often does a rule that has worked for thousands of years change to the opposite?

The millennial “more is better” race has left us with a bunch of traditions that are outdated but deeply rooted. This means that the person striving for success can reconsider them. It is important to know which traditions to accept and which to reject.

The proliferation of small organizations began in the startup world.

There have always been isolated cases, particularly in the United States, when an ambitious person started his business and the service ladder grew under him; instead of starting from below and climbing up for years. However, until recently, this was an atypical path followed only by amateurs. It is no coincidence that the great industrialists of the nineteenth century were little educated. As long as their companies grew to enormous sizes, they remained mechanics or shopkeepers. It was a social step that a college graduate would never have taken if he could have avoided it. Before the advent of start-ups and in particular internet start-ups, it was very unusual for educated people to start a business.

The eight people who left Shockley Semiconductor and founded Fairchild Semiconductor, a fresh Silicon Valley startup, didn’t even try to start a company at first. They were looking for a company that would hire them as a group. Then one of the parents introduced them to the owner of a small investment bank, who offered to finance them if they started their business. And they started. However, the idea of starting a business was foreign to them, they were forced to do so. [4]

I’m pretty sure that almost every Stanford or Berkeley graduate who knows how to code has at least thought about starting a startup. The same is true for universities on the East Coast and the UK. This picture shows the direction in which the world is moving.

Internet startups are only a small fraction of the global economy. Could the trend seen in their example be so powerful?

That's exactly what I think. There is no reason to believe that there are any limits to growth in this area. Like science, wealth increases recursively (1). Steam power was a tiny part of the British economy when Watt took over. But his invention spread until it took over the entire economy.

The same can happen with the internet. If Internet start-ups offer ambitious people better opportunities, then a lot of ambitious people will pursue them, and that small part of the economy will grow recursively.

Even if Internet-related projects make up a tenth of the economy, they will set the tone. The most dynamic part of the economy always sets the tone for everything from salaries to dress codes. Not just because it's prestigious, but because the principles underlying the most dynamic part of the economy are working.

The trend of the near future, which is worth betting on, networks of small autonomous groups, whose effectiveness is individual. And the winner is a society that creates fewer obstacles.

Just as during the Industrial Revolution, some societies will be more efficient. Born in England, the Industrial Revolution spread across Europe and North America in a generation. But it didn't spread any further. This new way of life could take root only where there was appropriate soil. We needed a vibrant middle class.

A similar social component was needed for the transformation that began in Silicon Valley in the 1960s. Two new technologies were born here: the production of integrated circuits and the creation of companies of a new type, rapidly growing due to the introduction of new technologies.

Production of integrated circuits quickly spread to other countries. But startup technology is not. Fifty years later, startups are ubiquitous in Silicon Valley, found somewhere in the US, and completely alien to the rest of the world.

One reason, perhaps the main reason, is that startups didn’t spread like the Industrial Revolution is that they are socially destructive. While making many changes, the Industrial Revolution did not touch the more-better principle. On the contrary, she continued it. New industrial companies adapted to the tradition of large military or civilian organizations, and it worked perfectly. The "captains of industry" gave orders to the "armies of workers," and everyone knew what was expected of them.

Startups go against the foundations of society. They find it difficult to flourish in societies where hierarchy and stability are at stake, just as industrialization has been difficult to take root in societies where the merchant class had no power. But by the time the Industrial Revolution began, there were a number of countries that had passed this stage. But they don’t seem to exist in today’s situation.

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[1] From this model came the fact that in order to earn more, you had to become a leader. This rule also applies to startups.

[2] There are many reasons why American car companies are worse than Japanese ones, but in at least one way they outperform Japanese car manufacturers: American carmakers have more choices.

[3] Maybe someday companies will be able to grow into big companies in terms of revenue rather than the number of employees, but so far we have not gone far in this direction.

[4] Lecouer, Christophe, The Birth of Silicon Valley, MIT Press, 2006. (Lecuyer, Christophe, Making Silicon Valley, MIT Press, 2006).

(1) Recursion in the general sense, the inclusion by an entity of itself as a whole. That is, steam power was a small part of the economy, and then grew. And steam energy became the basis of the economy.

Thanks to Trevor Blackwell, Paul Buchheit, Jessica Livingston, and Robert Morris for reading drafts of this.



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Source: geektimes.ru/company/neuronspace/blog/263498/