[Book Notes] The End of Power by Moises Naim

One of my goals for 2015 is to read an average of a book per week. Partly to fulfill this goal I will attempt to read every book that Mark Zuckerberg posts in his book club ‘A Year of Books’ (which averages to two books per week). My intent is to build a stronger hypothesis / perspective on the events taking place around me.

Below are my notes and thoughts on Moises Naim’s “The End of Power”.

Summary:

Naim—an economist, author, former Minister of Trade and Industry for Venezuela, and Executive Director of the World Bank—argues in his book that today “power is easier to get, harder to use and easier to lose”. Previously, and notably in the 19th century, large organizations became powerful because they were able to maximize profits and operate more efficiently than individuals because they were able to “internalize a broad range of necessary tasks, thereby saving on…transaction costs”. This gave rise to bureaucratic corporations, labor unions, large political parties and organizations that emphasized size, hierarchy, and centralized control. Today, he argues, these organizations are no longer advantageous because there is a notable decay of power due to three overarching trends he calls the “more”, “mobility”, and “mentality” revolutions.

The more revolution basically notes that because there is more of virtually everything today, power has become more easily decentralized due to the abundance of products/ choices consumers have at their disposal. Better stated, the Economist explains that the ‘more’ revolution describes a world of abundance. There are “more young people [who] they live in cities—65m people a year move to cities and more than half of the human population now lives in urban settings. There are more weapons, more medicines, more political parties, more companies, more NGOs, more religions, more communications. There is also more money—global GDP has increased five-fold and per capita GDP by three and a half times”.

There is also more mobility in our world. This allows people to travel, communicate and transfer goods with little control by national states or large bureaucracies. It creates what Naim calls the “end of captive audiences” for nation states, or as the Economist explains “the number of people living outside their country of origin has increased 37% according to the United Nations. Therefore, people are becoming harder to govern”.

Finally, there is a change in mentality that has brought higher expectations for people across the world who now have a “greater moral consensus about the proper behavior of nations than humanity has ever known before”. According to the Economist “this change in cultural norms is corroborated by the World Values Survey which shows a clear movement towards openness, gender equality and increased tolerance of difference”. (Related: The Athena Doctrine)

Nat’s Notes:

One of the consequences of these ‘revolutions’, especially to large players, is that micro-actors and micro-powers have become more relevant/ influential today than ever before. An interesting statistic related to this trend is that:

 “…when nation-states go to war these days, big military power delivers less than it once did. Wars are not only increasingly asymmetric, pitting large military forces against smaller, nontraditional ones such as insurgents, separatist movements, and militias. They are also increasingly being won by the militarily weaker side…A study by former Harvard scholar Ivan Arreguin-Toft on asymmetric conflicts shows that between 1800 and 1949 the weaker side won 12% of the time, but between 1950 and 1998 the weaker side won 55% of the time”

This trend also seems to signal that large, powerful players (CEOs, politicians, public figures), pay a steeper and more immediate price for their mistakes than did their predecessors due to the increased power of micro-actors (ie. bloggers, opinionated tweeters, startups, etc).

It is an interesting trend because, as the book points out, it creates a potentially stagnating situation in which “everyone has a little bit of power…everyone can constrain and veto but nobody has the power to get things done”. In a sense, this quote reminds me of the power that ‘sharing economy’ companies have gathered—companies like Airbnb and Uber—who have tremendous power over relatively vast resources and customer bases, but who sometimes cannot act because larger governmental / hotel / taxi lobbying powers prevent them from being fully legal. Against so many stakeholders the state does seem to not have the resources, decisiveness, and maybe even power, to definitively take a stance on the legality of these companies, making it so that users continue to rent out their apartments in a stagnated grey area of moral correctness / legality.

A second consequence, and one that I find especially relevant to my age group (18-34), is that because power has become increasingly decentralized it may no longer make sense for millennials to plan their careers around a single, powerful institution, but rather to focus on polishing personal skillsets and develop a brand that highlights individual potential. Related, the Economist recently published an article titled “There’s an app for that: Freelance workers available at a moment’s notice will reshape the nature of companies and the structure of careers”.

In this article the Economist explains that:

For a while after the second world war everybody seemed to benefit from [the large institutional] model: workers got security, benefits and steady wage rises; companies got a stable workforce in which they could invest with a fair expectation of returns. But the model started to get into trouble in the 1970s, thanks first to deteriorating industrial relations and then to globalization and computerization. Trade unions have lost power in the private sector, particularly in America and Britain, where legislation has reduced their ability to take action. Companies kept stricter control of their labor costs, increasingly contracting out production in industrial businesses and re-engineering middle-management. Computerization and improved communications then sped the process up, making it easier for companies to export jobs abroad, to reshape them so that they could be done by less skilled contract workers, or to eliminate them entirely….

The on-demand economy is unlikely to be a happy experience for people who value stability more than flexibility: middle-aged professionals with children to educate and mortgages to pay. On the other hand it is likely to benefit people who value flexibility more than security: students who want to supplement their incomes; bohemians who can afford to dip in and out of the labour market; young mothers who want to combine bringing up children with part-time jobs; the semi-retired, whether voluntarily so or not…

…The on-demand economy will inevitably exacerbate the trend towards enforced self-reliance that has been gathering pace since the 1970s. Workers who want to progress will have to keep their formal skills up to date, rather than relying on the firm to train them (or to push them up the ladder regardless). This means accepting challenging assignments or, if they are locked in a more routine job, taking responsibility for educating themselves. They will also have to learn how to drum up new business and make decisions between spending and investment”

If this is the case then it is likely very worthwhile for people in my age group to approach a career differently than our parents once did. If the ‘App Economy’ demands sharp, on demand, opinionated contractors we should devote more time crafting a strategy that allows us to position ourselves for a professional future that anticipates individuals to sell themselves, over having a companies sell the individual.

Sources:

There’s an app for that: Freelance workers available at a moment’s notice will reshape the nature of companies and the structure of careers  (http://www.economist.com/news/briefing/21637355-freelance-workers-available-moments-notice-will-reshape-nature-companies-and )

The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being In Charge Isn’t What It Used to Be (http://www.amazon.com/End-Power-Boardrooms-Battlefields-Churches/dp/0465065694/ref=sr_1_1?ie=UTF8&qid=1422550637&sr=8-1&keywords=the+end+of+power)

Quick study: Moisés Naím on power “It ain’t what it used to be” via The Economist (http://www.economist.com/blogs/prospero/2013/03/quick-study-mois%C3%A9s-na%C3%ADm-power)

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