From time to time I browse the IshCon discussion forums, whose members are already sold on the need to create a bottom-up economy to replace our unsustainable ‘market’ economy. I rarely post there, however, because the format of discussion forums doesn’t work for me: not enough context for the ideas, a bit too much ‘echo chamber’, no good way to archive what’s really valuable in them, and (certainly not unique to forums) a dearth of experience in real enterprise formation and a poverty of imagination among many of the members.
Recently, however, IshCon (and How to Save the World) reader MatthewJ pointed me to a couple of threads (1) (2) that were really earnest, action-oriented and thoughtful, and which tied in closely with two of my recent posts. The quotes that follow are (with one exception) made by Ghost (a Montrealer also named Matthew). Two points here: I agree entirely with most of what Ghost says in these threads, and I’m ‘picking on him’ in this article because I think he has a few misunderstandings about how economies and societies work that are making what he’s trying to do unnecessarily more difficult. So please IshCon’ers (I know several of them read this blog, and MatthewJ may send some others this way), don’t construe this article as being critical of Ghost or what IshCon is trying to do with New Tribal Ventures (very close to what I call Natural Enterprises). And secondly, several others have contributed importantly to this thread and to developing Ghost’s ideas, and I hope those I don’t mention don’t feel slighted that I’m focusing this article on just one contributor’s ideas. I do understand the power of collaboration.
So here, unfairly out of context of all that Ghost has said that is exactly right, are some excerpts [in red text] from these two threads that I would take issue with, and why [my response in black text]. They’re important because, I think, they’re very common misconceptions about the workings of our economy, and of modern complex societies, misconceptions that are so subtly and relentlessly perpetrated that we tend to accept them as conventional wisdom, when they are in fact propaganda that advances the interests of a powerful and wealthy corporatist elite. Where I have used, on this blog, different terminology from that generally used on IshCon (terminology used by Daniel Quinn, whose books Ishmael, Story of B and Beyond Civilization inspired the discussion group), I note my equivalent terminology after an equal sign in italics (=like this) for ‘ease of translation’.
[Ghost said]: The entire point of an intertribal economy (=networked economy) is about building one that works smack dab in the middle of claimed niches. It’s about becoming a parasite in an established host and reclaiming parts of their already claimed niches. It’s an opportunity for the millions not able to flee to the countryside to survive collapse. It’s a solution for the here and now…Niche markets are small markets and generally can’t support any competition. They are generally occupied by a single small business with 100% market share…Until they become independently self-sufficient, they simply need the [open market] client base to survive.
I think this is far too negative a view of the situation and need for struggle of Natural Enterprises. It’s a very popular, traditional and well-ingrained perception that entrepreneurship is an enormous amount of hard work and constant struggle fending off threats from bigger, established, well-bankrolled competitors. In my experience working with hundreds of entrepreneurs, nothing could be further from the truth.
Large, multinational, hierarchical corporations are not designed to provide customer service. They are designed to maximize margin and profit for senior executives and major corporate shareholders, by charging the customer as much as possible and giving them as little as possible. Under their charter (and under threat of dismissal or legal charges if they defy it) they can do nothing else; they are tied to this model of operation and decision-making. Worse, they have to grow each year or die. The model is inherently unsustainable, and Fortune 500 companies all, inevitably, crash and burn.
All Natural Enterprises need to do is focus on meeting customers’ evolving unmet needs effectively. Talk to anyone who is buying from a small business with no growth aspirations, instead of from a ‘competing’ large hierarchical corporation, and in so many words they will tell you that is why. The chart at the top of this page summarizes the 10 enormous advantages a Natural Enterprise has over a hierarchical corporation, when it ignores all the absurd conventional wisdom (about growth, external financing, advertising, huge risk, endless struggle, the need to do everything yourself etc.) and just focuses on meeting customers’ evolving unmet needs effectively.
As my book explains, doing this takes a lot of work, but it is low-risk, low-stress, low-cost, joyful work. It is the antithesis of what most people do (even those who should know better) when they actually start to establish their own business.
Today, customers place a high, but declining, premium on brand, on low-price, and on efficiency of purchase (“at your door in 30 minutes or it’s free”). Because of the Internet and the explosion of available information through it, those three advantages of large, hierarchical corporations are waning in importance. Fewer customers are buying into the nonsense that brand equates with self-worth, that “you are what you own”. Brand as a surrogate for quality and integrity is shattering as more an more corporations reveal their true stripes (lying to customers, suing customers, shutting down local operations and attaching their name to shoddy imported goods and services, and massive Enron-type frauds). After a few trips to Wal-Mart to buy the same thing over and over because everything bought there breaks in a day, customers are realizing that “you get what you pay for” (if you’re lucky) and, even if it hurts, are starting to make price/quality trade-offs in buying decisions. As the US government teeters over the edge into bankruptcy, it will no longer be able to afford the massive subsidies to big corporations that allow those corporations to sell stuff (with your tax dollars) to you so cheaply. It will no longer have the clout to bully other nations into ‘free’ trade agreements that distort and cripple those nations’ local economies for the benefit of the colonizers. And as we move to a network-facilitated economy of ‘mass customization’, fewer and fewer will opt to buy the ‘standard vanilla one-size-fits-all’ product today. They will opt instead to wait until next week and get precisely what they want from a (Natural) enterprise that has the capacity to provide that.
So Natural Enterprises, if they’ve done their homework, ignored the conventional wisdom, set themselves up properly, and focused on meeting customers’ unmet evolving needs effectively, do not need for one moment to be parasites on the existing economy. When the customers are delighted, they will ‘work around’ the inhibitors and obstacles in the existing economy with you. If what you’re doing works for them, that’s all that matters.
[Ghost said:] Tribal businesses (=natural enterprises) can no more compete with Annihilator businesses (=hierarchical corporate oligopolies) than tribes (=networked societies) can compete with Annihilator societies (=hierarchical, imperialist societies)…[a] biodiesel business is a great idea until Willie Nelson… or the oil [oligopoly] figures out there’s money in it… or that they can use the product themselves.
I think the chart above addresses this concern. A reading of Clay Christensen’s The Innovator’s Solution might alleviate some of these concerns, as it contains dozens of examples of small, customer-focused, well-researched entrepreneurs who made a very comfortable living off the many customers that large corporations simply are incapable of serving effectively, for the reasons I described above. What’s interesting is that the large corporations were aware of the ‘loss’ of these customers and made no move whatever to respond to it — it was a diversion from their obsession with growth and high margins — and eventually in many cases they lost all of their customers to the renegade who just provided solutions to unmet customer needs better.
Suppose you were to set up a local all-renewable energy co-op to serve your community. Your initial customers might only be altruists willing to pay a premium to you to ‘be good’. But the grid providers, while efficient, are horrifically vulnerable — to The End of Oil, to terrorist activities, to weather-related transmission problems, to energy speculators, and many other factors, some of them inevitable. They don’t think ahead. They aren’t rewarded for doing so. There is insufficient short-term payback for their shareholders. They will ignore your co-op, even when your price drops below theirs (as renewable technology improves, and as their variable price soars, your fixed price drops). Their price increases will give you an ability to expand your capacity until the whole community is your customer. And when the grid goes down, you party. Is the community worried about your ‘monopoly’? No, because the whole community, all your customers, are your partners. They share in your success. Many of them probably work with you in the now-prosperous Natural Enterprise. And you never have to worry about terrorists, about war, resource depletion, transportation costs and disruptions, new pollution and global warming findings, or great depressions. You’re all in it together. You are resilient, immune to the effects of the ‘market’ economy. You never have to grow.
I wrote recently about how many examples there are that work just as well as local energy co-ops, and cut across every sector of the economy.
[Ghost said:] Small hierarchical businesses (=enterprises that use the traditional hierarchical corporate model to establish, fund and grow themselves, instead of the Natural Enterprise model) have the advantage in the open market in that they can expand…We’re better off starting businesses in the ‘limited’ sectors and the niche markets because they have a much better survival in the open market…If tribal businesses can become trendy, if it’s chic to shop at them, then that’s good for us…
There is no ‘open market’ or ‘free market’. We live in the most tightly-controlled oligopolistic economy in history. These oligopolies buy politicians (and hence subsidies and favours), corner supply, buy up competitors to eliminate competition, and blanket the media with an unprecedented and relentless flood of propaganda called ‘advertising’. We don’t want to compete in that market, and we don’t want to ‘expand’. Growth is unsustainable, period. What we do instead is outmaneuver. We’re better off starting businesses wherever there is a significant, researched, evolved unmet customer need that we have the competencies, knowledge and resources to fill. Every sector, every market has lots of them.
And trendy business is not good for us. It’s ephemeral, it’s tying into people’s wish for escape. You can’t jam the culture; it will just co-opt you.
[Ghost said:] Allegedly, the Chinese government condemns Falun Gong practitioners to death, executes them, and then harvests their organs (which are generally in good shape because of their health regimen), and sells them on the black market…for $40k…The commodification of humans is the ultimate expression of the free market, [which] is about unlimited competition…The free market violates the Law of Limited Competition…Today, small businesses are being swallowed whole by large multinational corporations, from the local cinema to the family farm. In an economy of Limited Competition, the small business would flourish.
The Law of Limited Competition is a principle arguing for a mixed economy, where some competition is encouraged to promote ‘efficiency’ but (now-defunct) anti-combines and anti-trust laws are used to prevent too much ‘efficiency’ leading to oligopoly and monopoly, which many view as the inevitable consequence of unregulated capitalism. But it doesn’t apply in today’s world at all, where we have no real competition left, and where politicians are bought to ensure, through subsidies, intellectual property laws, corporate indemnification and global ‘free’ trade agreements, that no significant competition is allowed to emerge anywhere on the planet.
We are way past the point of being able to reign in multinational hierarchical corporations and ‘force’ them to allow new entrants to compete with them through regulation. That doesn’t work, and never has. What’s more, a lot of hierarchical, traditionally-structured small businesses are specifically designed to be swallowed up by large multinationals — that’s the whole point to their existence (“buy me, Google!”). I’ve spoken to many ‘small farmers’ who admit their goal in life is to wait until the city expands to their doorstep so they can sell their farms to real estate speculators and developers for fifty times what they’re ‘worth’ in the ‘open market’ as farms, and retire forever.
The businesses that are swallowed reluctantly by bigger corporations generally have not realized or been able to capitalize on the ten advantages on the right side of the chart above, advantages they could or should have, but, (perhaps because they’ve bought too much of the conventional entrepreneurial wisdom), have not. Generally, because they have few or none of these ten advantages, they have no value, in any market, and usually get sold for a song, or just shut down, bankrupt. They’re not Natural Enterprises, just failed corporate wannabees.
The bottom line here is that entrepreneurs (and aspiring entrepreneurs) should stop worrying about competing with hierarchical corporations, and instead just focus on discovering and meeting customers’ evolving unmet needs effectively. Through millions of Natural Enterprises doing just that, we could provide everything that we need that way. The collaboration together in a Networked Society of Natural Enterprises supporting and helping each other would just be a bonus, making us even stronger. Until that arrives, we would just operate below the radar of the hierarchical economy, disruptively innovating it from below, as Christensen explains. The only thing the hierarchical economy corporations can do in response is what they already do — advertise like hell, squeeze their hapless suppliers (to the point of bankruptcy) to keep “lowering prices every day”, and squeeze more money and favours from largely tapped-out governments. That is their ‘competitive advantage’, and it can’t hold a candle to the ten advantages of Natural Enterprise.
[Ghost said:] [Ultimately], the hierarchical economy…will begin to collapse, not because of any kind of attack, but through simple abandonment.
Now you’ve got it.
[MatthewJ said:] The only way I see this happening is if a fairly significant number of people who share these ideas…intentionally, physically get together, and start this from scratch. I don’t see the intertribal economy emerging from randomly forming tribal businesses (at least in the beginning)…We all need to move to one place and start this damned thing.
MatthewJ underestimates, I think, the power of complex adaptive systems. Nature, which understands exactly how such systems work, does not put all its eggs in one basket. Evolution is trying a large number of small, independent and diverse experiments, and seeing which ones ‘work’. The ones that work propagate in Darwinian fashion. I think it would improve our chances if “we all…moved to a bunch of places and started a bunch of different things”, and visited and communicated with each other to learn what’s working and what isn’t. As you probably know, I’m a believer in Intentional Communities, and I think they could be great incubators for whole sets of Natural Enterprises that collectively meet most of the needs of those communities. If they succeed, they would have great viral power and spread, I think, quickly to other communities.
What I’m hoping to establish, in concert with some sustainable entrepreneurial associations like BALLE, is a centre and network where those wishing to establish Natural Enterprises can invite, find and meet partners to go into business with, get the tools, knowledge, resources and training needed to establish such an enterprise (and ignore all the dangerous conventional wisdom). This is not rocket science. Between us we have everything we need to make it happen. No war with oligopolistic hierarchical corporations and corporatist politicians. Just having fun experimenting with a new model that delights customers, and slowly weaning us all off dependence on the old, unsustainable, dysfunctional economy, until it collapses, starved of customers.
Just gotta make sure this is a labour of love with the right people. Even when you’re saving the world, life’s too short to not love getting up in the morning to do the work you were meant to do with those youwere meant to do it with.
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