What's Next For Capitalism?

Economists have been discussing evolution as a useful model of how the economy will move forward since the 1980s.  Diversity, selection and recombination can shape economic as well as natural ecosystems.  Chris Meyer runs with this idea to make predictions about the global economy over the next decade.

He sees capitalism as an adaptive system that grew out of the conditions of the past.  The limited liability corporation, for instance, made the capital-intensive industrial economy possible because it spread the risk of providing the massive financing required for large scale manufacturing.

Meyer observes that although the technologies of the industrial revolution were developed in the U.K., the society that was built around them emerged in the U.S., where growth was rapid. “The same thing will happen this time,” Meyer says.  “The U.S. invented information technology, but the societies based on it will be developed by the youthful, rapidly growing economies in Asia, Latin America, and soon Africa.”  

These are the places we should study, he says, if we want to see how capitalism will continue to evolve.

Meyer, the founder of Monitor Talent and author of four books including the forthcoming, Standing on the Sun: How the Explosion of Capitalism Abroad Will Change Business Everywhere, has long been an innovator in the area where economics and technology intersect.  He has been thinking about digital convergence since the ‘80s, before most of the world even knew what digital was.  He recalls the days when his terminal connected to a time-sharing network with an acoustic coupler—a telephone receiver stuck into two rubber cups.

Meyer worries that business people see globalization as simply bolting on global markets to the capitalist system as it stands today.  But in an evolutionary framework, if you move a species to a new habitat, it will adapt over several generations. The capitalist system itself will change its rules to reflect the norms and histories of the emerging economies, but few people are expecting that.  “Fish are not aware of the water they swim in.  In the business world, most people are so focused on swimming that they’re not thinking about where the water came from.”

But outside the fishbowl, things are shifting.  The most robust economies today are figuring out ways to adapt capitalism to solve economic problems in places too poor to attract global competitors, and too poorly organized for government programs to have much impact.

“You see this in India, in particular, where people see challenges that we would call social problems in the U.S. as market opportunities,” Meyer says.  “Yes, there is a social benefit when you solve them, but that doesn’t mean you can’t make money doing it.”

Technology drives these new economic outlooks, according to Meyer, because it provides information required to determine need and assess risk:  “The feedback comes from the technology.  Everything comes back to the availability of data.  Once data is available, people start organizing around it.”

Free flowing information makes the boundaries of a corporation permeable, spurs innovation, and welcomes the use of external know-how.   Smaller networks of experts naturally come together to concentrate on targeted projects.  For the most part, these networks are making more headway in discovering new forms of capitalism than larger, bulkier, slow-moving corporations, Meyer notes.

“Networks make a wider variety of ideas available,” he says.  “You get more new ideas and powerful solutions on the best ones.  Companies that do not make themselves into networks are not going to be able to keep up with those who do.” But there are exceptions: GE, IBM, and a handful of other global giants are taking the lessons of the networked economy to heart, and will become powerful vectors spreading new practices in capitalism through the global economy.

Meyer embraces the biological framework of economics because he is already watching the evolution unfold.  He’s spent the past three years in Brazil, India, China, Bangladesh, and elsewhere, observing natural selection not just of products but of the “genes” of capitalism itself.  Capitalism is evolving into a new species, and the genetic variation driving the process is decidedly digital.

 “In the economies where the birth rate is higher, a greater portion of the population will be digital natives sooner,” Meyer notes.  “There are corporations who are taking this very seriously.”