28

Nov

2015

Authority and Technology

Tags: ,

Every society has organized itself along a vertical axis of authority. Whether we study old civilizations from the dawn of times to the nation states we have lived under in the 20th and 21st century, authority has been and is centralized. The difference only being in the degree of centralization and the amount of tools to force authority, i.e. rules, laws, regulations, from one civilization to another, one state to another.

To date, technology has held the promise of empowering individuals yet it has also been used to further centralize authority along a vertical axis – think about cyber surveillance to name but one example.

Be that as it may, we have entered an interesting inflection point in mankind’s historical development where individuals yearn to organize themselves more horizontally and technology advances are enabling such horizontal approach. By horizontal authority I mean that authority is not centralized at the top but distributed across individuals.

Networks and marketplaces are ways to organize social or business relations in a more horizontal way. These constructs sometimes help cut out a middleman or a central point of authority. Add advanced technology tools such as APIs, data analytics, smart phone technology, broadband internet and entirely new business models come to life with the premise of giving more power to individuals or benefiting them economically. Think of examples such as eBay, Uber, Airbnb, the p2p lending movement with firms such as Lending Club or Prosper, p2p payments platforms such as Venmo, or the crowdfunding platform movement with Kickstarter or the equity crowdfunding movement enabled with the JOBS act. I would include social networks, generalist ones such as Facebook, or specialized ones such as Yelp in the same overall movement. Individuals organize themselves horizontally.

Taking this chain of thought one step further, the bitcoin blockchain is part of this horizontal movement. Logically consensus ledgers technology (my term as a replacement to distributed ledgers) taken in a broader sense of the term is also an enabler of horizontal diffusion of authority to the detriment of vertical and centralized authority.

I will note that every movement towards horizontal authority either morphs into a centralized paradigm when maturing or swaps a traditional centralized vertical authority for another type of authority, more subtle or hidden. Let’s take the example of p2p lending which rapidly became institutionalized and dropped its true p2p promise. Let’s take the example of equity crowdfunding with AngelList – a brilliant business model btw – where authority is not fully horizontal but distributed across known and reputable investors who aggregate syndicates around them. Let’s take the example of Uber where two “tyrannies” rule, Uber’s API and sets of rules which provide some centralized authority, and the rule of the majority which delivers a consensus on who is a good/bad driver/client.

Circling back to the history of mankind and its strong adherence to vertical authority, other than an ancient society such as the eskimos where there truly was no central authority, or the rule of the majority and peer pressure among a group of 5 year olds in a kindergarten, there has never been any example of successful and truly horizontal authority.

Does this mean that even with technology advances we are bound to replicate various levels of centralized vertical authority? I tend to believe that is the case given technology advances to date. Yet the question needs to be asked and answered, if only to either elaborate counter proposals to the ever increasing production of vertical reinforcing legislation and rules at the state level; disprove the historical atavism of vertical authority or enable technology to usher true horizontal authority constructs.

A final parting thought, given the current state, what would the trade off be to move to horizontal authority constructs? We would get rid of the excesses of centralized authority but we would gain the messiness of kindergartners relations and problem solving.

 

 

 

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Pascal Bouvier
pgb2008@gmail.com

Life and work experiences have given Pascal an unmatched vantage point, seeing things as both venture capitalist and aspiring entrepreneur. He currently is a Venture Partner with Santander Innoventures – Santander Group’s Global Fintech fund.

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