A speculative short-term model for small businesses in the cybernetic age
In the classic problem of operations research, the goal was to minimise the total distance the traveling salesman has to cover while shuttling between five cities. While everyone was trying to figure out the best solution, someone told the salesman that all he had to do was fire up a laptop and go online. The poor man died of shock at this news. This is a scenario of what might happen next.
We may see, as time progresses and the rate of change in technology becomes faster, that those mammoth organisations that are not capable of absorbing creative technological disruption, may eventually collapse or disintegrate. Small businesses which are run efficiently, will respond much better to any such tectonic shifts. They will respond negatively in some cases, but if they are loosely connected in the following way with other similar-dissimilar entities, they will survive and even prosper.
The basic element of any business network is usually assumed to be a person, until we reflect upon his diverse skill-set. Any normal human being, by the time he reaches professional maturity, acquires a number of skills (N) depending on how diverse (arbitrary degree of diversity, D) or adventurous (arbitary willingness to take risk, R) his experience has been. It will be later shown in this essay that a person with a fairly random and large number of skills (jack of all trades) is in fact, the master of something. Also, it will suggest a new skeleton for a company without any hierarchy.
We will begin with a two person collaboration. These two people may be geographically disparate, but are connected by some kind of cybernetic mechanism. They are X and Y, who possess their individual skills represented by NX (X1,X2,X3 ) and NY (Y1,Y2, Y3 ).
Please note that if X posseses NX number of skills, then his actual capabilities are a combinatorial result of these skills, not just the skills themselves. You could say that NX number of skills translates into T capabilities, where T stands for NC1 + NC2 + NC3
= Σ NCx
where x = 1 to N.
Also to be noted is the fact that any X can be similar or dissimilar to any skill that Y posesses. Both of these similar-dissimilar skills will affect the business collaboration of these two people. Similar skills when shared on a responsibility will provide robustness to the collaboration, and a unique combination of dissimilar skills may provide an entirely new capability to the collaboration.
Ill represent the over-lapping skills as a Venn diagram (see picture). The overlapping portion of the diagram represents the level of ideological comfort, and also the job-sharing capabilities of these two people. The region that does not over-lap, is the ways in which they can extend the network further, or the space they can share with other people.
In Indian societies in the 20th century, it was increasingly seen that people preferred to marry within the profession. My parents are both doctors, and that was one way they could share the responsibilities of both family and the practice of medicine at ungodly hours. However, too large a portion of skills in common is not a good sign, since the differences between a bond of two people are their tentacles into the outer world.
Now imagine a network where many such people, not just two, are loosely connected. In fact, there must be some optimum value of looseness and tightness at which this system will perform at maximum efficiency.
Now we can draw an arbitrary shape within this network and call it a Company. A Company in this sense is nothing but a contractual manifestation of a shared vision.
Let us take the case of Apollo Bunder Comics, the actual company I run with just one employee myself. However, some of the skills I have are present in my friend and business partner Soumyadeep Paul. He in turn runs the actual company Projected Image Productions which is a film-making studio with just one employee Soumyadeep himself. However, I too have some of the skills required to make a film. In my absence while Im away making a film, Soumyadeep could be filling in my shoes at Apollo Bunder Comics. On paper, however, it would seem that both ABC and PIP have two employess each. None of us has a real job, and yet we run two companies apiece. Companies which have no hierarchy.
We are behaving a bit like covalent electrons. It is not difficult to see why chemistry, and specifically 'ion exchange' is how nature conducts commerce. Its currency is electronic charge, which is fast becoming our currency as a specie too.
A widely seen structure which uses hydrogen bonding, a slightly different chemical force acting at the atomic level than covalency ( there are others van der waal forces, gravity etc) is - H2O or water. In flexibility it is amazing, in that it fills any space that it is poured inside. This is largely possible because it makes and breaks these hydrogen bonds at a rapid pace.
When we look around today, we see many more people leaving and joining new jobs bonds breaking and reforming, or in media jargon - churn. There is no indication that this churn will become any slower, as options available to people increase with the proliferation and evolution of the internet.
However, water is a very basic example in that it is made up of only two kinds of atoms. Far more complex structures and models are already showing up in Blogsphere, on Ryze Business Networking, aided by marketplaces like Craigslist, eBay and Elance. Even WorldChanging is a potential due to participants with high D values..
Now we visualise this entire teeming landscape and power it with something like Google, something capable of searching through needs and wants of these numerous companies, be it skills or resources. Finding a piece that fits, with this search mechanism, creates a short-circuit between all associated networks, which is independent of geography, race, religion, sex and status. (This is the key to the social implications of such a business structure, however, another paper can be written about that.)
In such a society, people with high values of D and R will be interesting to observe. While people with high D (diverse set of skills) will become supernodes in this fluid network, people with high R will constantly challenge the network with disruptive signals.
Feedback is life.
As you probably know, lots of the literature on social networks confirms your point, especially the physicists who are now invading the field, redefining their remit as the "study of all organizational forms". Scarily Platonic, if you ask me. Anyway, see the following titles if you don't know them already:
* Nexus: Small Worlds and the Groundbreaking Science of Networks by Mark Buchanan (WW Norton & Company: 2002)
* Linked: The New Science of Networks by Albert-Lászó Barabási (Perseus, 2002)
* Six Degrees: The Science of a Connected Age by Duncan Watts (Norton: 2002)
This burgeoning "science" of social networks does confirm your point that certain type of skills and experience in certain types of people confer advantage in a network. That not all people (or nodes) are equal, that more begets more. It's tricky, however, defining what "advantage" is because this is not always monetized. In any event, I've often toyed with the idea of creating a workshop for the b-schools I teach at called "Social Networks as Core Competency for the Future" which would draw out these implications. I'm sure they already exist.
This is reminiscent of the line of thought started by Coase's work, on why firms exist - as opposed to networks of individuals who could form ad-hoc collaborations. Many have updated the idea, e.g. Benkler's essay on Coase's penguin (firm structure through the lens of free software experiences).
We're definitely more able to know of opportunities and complementary skill sets in others now - in your analogy, that would be like increasing the temperature and stirring much better so reactions are more likely. But are we that much more able to collaborate, aside from online? Legal, monetary, and trust issues, for example, are not being reduced so rapidly.
But once tools and social protocols that resolve these issues for larger-scale and longer-term ventures advance, I think we'll really start seeing breakthroughs in forming businesses and non-profit ventures...
I've been thinking incessantly about this. "The Nature Of The Firm" by Coase is a true classic, and Brenkler's "Coase's Penguin" is fascinating as well.
The math I did above is very sketchy and probably wrong, I've been told. I'm just bursting with questions after that -
Look at us at WorldChanging, why are we here? This is an open source blog, right? What are the "transaction costs" involved in running this blog?
How are we defining property rights in this case?
Do we even care?