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The Pyramids eat their own

Stirling Newberry's picture

Friday is a good day to write something that few will read, and most will not understand – for a long time. This essay is on a short topic, the process by which the pyramid top down structures are eating their own. Social organizations exist in feed back with their means of production and acquisition, and move along the lines of their communication and flow of benefits. One can see a structure by the equality of its nodes and the direction of communication and benefits. A pyramid is a top down structure were command flows primarily downward. It focuses on multiplying the decisions of a few, over the many, through intervening levels of detail and implementation. Crucial to the top down structure is the mediation of some scarce resource, through a broad population of consumption. Even where such a relationship does not naturally exist, pyramids create artificial scarcity, often as a front from managing real scarcity. For example, there is no shortage of music making, but copyrights make it so.

In The Revolution Itself I argued that political parties were becoming top down, around the control of the flow of money, which was an artificially scarce resource. The leader of a party controlled the funding streams, and offered to mediate between the funders and the public, a trade: the funders got the macro policies they wanted, while a coalition of enough people would receive benefits for their consent. Politics would polarize, because by definition, the most profitable balancing point, is paying one half of the poor, to vote against the other half of the poor. We are now on the other end of that arc: the revolution is about to eat its own.

What must be realized is that this is a fundamentally conservative revolution, and it favors reactionary steps when it is not in conservative mode. It is the revolution of the pyramid consuming previous waves of organization. It's difference is not the pyramid itself, it is that its members have an aesthetic preference for pyramids over other forms, where their predecessors did not. The other difference is that their predecessors faced resource and production realities which favored grids and networks in a large number of cases, where as the present has become focused on resources that are increasingly in the hands of the few. For an example, take a look at the percentage of global oil output that is from OPEC, and the projected future production.

The scarcity of global resources to produce the modern and post-modern life style, is the driver of the pyramidification of society. The United States is an increasingly pyramid society, because we are mediating an artificial scarcity, our intellectual capital and network rents, for a slice of an every more scarce flow of oil and other resources. The two reinforce each other: to get out of the resource bottleneck means destroying the value of old capital. Neither of the two poles in this process have it in their interest to change this process, regardless of small realities like peak oil or global warming. In fact, these realities are used as clubs to accelerate the process.

The victorian and modern past was not dominated by pyramids for both technological and objective reasons: resources were scattered farther than communication could reach. The 19th century built grids, even when they did not think of them this way, because more or less every area exploited arable or grazeable land and water first and foremost, everything else, required first food, for humans, and for animals that did much of the work. The Victorian overthrew the pre-victorian, when fast network organization could overwhelm regimental grid organization. The modern reintroduced the grid, only driven by a counter reality that any area could be made equivalent by transportation, communication, electrification, industrialization, and ultimately, mechanization and elecrtonification. But we shouldn't mistake cause and effect, neo-grid organization was a choice, not the only solution.

The pinnacle of the modern featured a series of conflicts, which were as much about the kind of social organization as anything else. One of the major conflicts was between grid systems, and a new kind of pyramid enabled by modern technologies. Economically a loosely joined grid of hetrogenous but closely equal parts is the most efficient system over time, that is, in the long run. It is the over time part that is the problem, because it is that long run in which we are all dead. Pyramids are faster, and can win any given point of conflict. The result of the conflict was an amplified version of the American Civil War: the hierarchical society won the battles, but it was ground under by the grid's ability to harness resources out to the edges of its control.

The result is that there are medium term solutions based on returns, where the less efficient long run, but higher short run return, will be ahead of a trendline than the more efficient system. Eventually this will turn around, but the lower efficiency system makes it a point not to allow things to get that far. It buys, destroys or otherwise drives out of business the more efficient long term models with short term profits, or rents designed to force reallocation to those that won early. This is in fact an extension of an observation by Adam Smith.

The late modern turned to the pyramid to answer the post-modern problem of production: which is capable of producing virtually unlimited quantities of anything. Ultimately nothing is scarce except resources and power. However the two conspire in favor of scarcity, in that the bubble will expand until something is in short supply. The post-modern problem shows up in Science Fiction in the late 1930's with the Venus Equilateral series, and in philosophy and economics in the 1940's with game theory, and the rise of the monetarism of Miltion Friedman. In every case, the answers were the same: the means of exchange itself must be controlled, and artificial scarcity created to reinforce scarcity thinking.

The pyramid gave rise to the late modern, including its typical media of communication: broadcast. Broadcast is scarce bandwidth used to go in one direction.

Pyramids destablize the the market mechanism, because instead of a hetrogenous group of actors who have different but randomly distributed wants, there is a small group of actors that it is much more profitable to service, no matter how badly. The most blunt form of this is seen in mining towns, where those employed by the mines make much more than everyone else. Hence servicing miners, however badly, is better than doing anything else, no matter how well, for anyone else. The observed reactions fall out of this choice matrix, including prostitution, high food prices, and violence.

The problems with pyramids are then not only that they are wasteful, that's definitional in their disruption of the market mechanism, but also expensive to maintain. The price of command and control grows exponentially. This falls out of statistical dynamics, it takes an exponential amount of energy to reduce entropy linearly.

Thus eventually pyramids have one of a short list of problems. One is they burn through their scarce resource, particularly if they must burn the resource, to exercise control. A second is that they reach the limits of their communication control. Which limits the size, if there isn't more space to expand. A third is that pyramids multiply the decisions of the top, which, after a time, are filled with people who spend all of their time getting to the top, and none learning how to increase the size of the pyramid. Once overthrowing the emperor is better than any campaign, no emperor will count on dying in his sleep again.

Living as we do, in the age of pyramid people, the entire society will be burned down to preserve the pyramid. To those in it, however peripherally, the society exists solely as life support for the pyramid, from which all blessings flow.

However, one interesting part of this moment is that all of the smaller subsidiary pyramids that modern and earlier post-modern systems left in place, are now being coöpted or destroyed. This is because first, the top now needs to have absolute control to negotiate every detail. Consider Obamacare, it is a product of pre-negotiation down to year by year, demographic by demographic. It required total control, because every dollar had to be haggled over. Down to reimbursements that small companies now need to file 1099's over.

The same is true with political organizations which previously were not worth running, in terms of cost. Consider the destruction of ACORN. It was not done by the right, but by the left as well, to be consumed by OFA. ACORN, as a separate institution was doomed, because it had its own structure, and did not contribute all of its surplus value upwards. That is the crucial point of this moment: all surplus value in the society is being sucked upwards, either for command and control, or the luxury of those who run it. No one, other than a few, is actually getting ahead.

The passing of the era of micro-pyramids heralds the end of micro-politics, the time when small organizations negotiated for small gains, bought at the price of betraying those with similar interests. Each group bid for its contribute to the coalition, hoping to push others out. The most efficient coalition, was the cheapest plurality.

Thus in our moment the old organizers have put on the jackboots and are viciously shilling for the very forces that destroyed them. They are ideologically committed to the idea that empowerment comes from creating micro-pyramids, even as those pyramids are vacuumed up into a power structure that whether under Democrats or Republicans, gives all, and more, of any increases in productivity to corporate profits and the salaries of the top 1%.

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BDBlue's picture
Submitted by BDBlue on

I assume eventually the larger pyramid - the one the rest is being sucked into - will itself run into the limits - resources (especially oil), communication, etc. That it will also eat itself. So what comes next?

Submitted by lambert on

Stirling writes:

Once overthrowing the emperor is better than any campaign, no emperor will count on dying in his sleep again.

That might be one answer to your question.

zot23's picture
Submitted by zot23 on

So how does one fight against a pyramid structure? Is it by starting little "fires" all around the periphery of control and letting the command structure chew itself apart trying to put them all out? Or is it an Atlas Shrugged situation where enough of the base decide to stop sending production upward?

Interesting post, definitely shifted my perspective a bit. I'll need to go away and give this some more thought. Please post more in a followup if you can.

BruceW07's picture
Submitted by BruceW07 on

I'm privy to a lot of manufacturing cost data, and I can confirm that most "stuff" is remarkably cheap to produce. The general secular trend since continuous process manufacturing emerged in the 1920s and took off in the 1930s has been toward larger and larger sunk costs, less and less of what we used to call "direct labor", and marginal unit costs declining to remarkably low levels.

The odd thing is that the huge sunk costs combine with gateway rents to produce huge pyramid organizations, exploiting the quasi-rents on sunk cost investments and the ordinary rents from gateway control in the distribution system. The most trivial products have to be produced by giant conglomerates and sold at a huge markup. Try to buy unwaxed, unbranded dental floss at the Supermarket -- it's not available; a product that ought to cost $0.25 sells for 5x or 10x that. Oh, there are 14 "choices", in colorful graphic design, but none of them is plain, cheap, effective unwaxed dental floss.

I tried to help someone, a few years ago, sell some manufactured junk through CostCo "roadshows" -- special product offerings that last for a couple of weeks in individual CostCo stores. A "broker" with access to CostCo employees, who control who gets a "roadshow" took the lion's share of profit on that venture. Pure gateway rent.

AT&T -- a company with "telegraph" in its name and the ur-pyramid of corporate America circa 1925 -- is charged with building out a high-price system of internet access, and a crappy cellphone system, for much of the country, for no particularly good reason.

Or, the iPhone. iPhones are made in China in giant factories, where the workers commit suicide, instead of going on strike. Unsubsidized, their price in the U.S. runs around $500, I think. But, in southern China, where garage-shop entrepreneurs have access to supply of the parts, imitations -- some of them feature-superior -- sell for $250 or less. Even in the U.S., there's a semi-underground of people, who can do basic repairs. But, Apple dominates music sales and smartphone mindspace.

It's kind of weird, this ever-increasing concentration into the corporate octopi of conglomerates and alliances: Proctor-Gamble v. Kroger v. Wal-Mart, in an era when the actual threshold cost of production as well as the marginal unit cost is actually diminishing markedly. The cost of recording music and distributing it? There was a time, when recording studios were fabulously expensive, and recording time a staggering cost, while distribution required payola and an army of sales people to reach vast networks of stores. Today, not so much. But, Apple stands astride the distribution of music, a new giant. What's up with that?

There's no doubt that the CEO/FinMgr -class dominates political funding and activity, and sits atop these pyramids, raking in the big bucks. They have to, if their new aristocracy is going preserve its claims on a globalized economy, eh?

okanogen's picture
Submitted by okanogen on

I'm not exactly clear on what gateway rents are, but it's probably what I'm dealing with every day!

Other things driving simple production or delivery of services towards larger and larger corporations are just the staggering complexity of carrying out even a relatively simple small business. The regulation, the one-size-fits-all insurance, the training, record-keeping, accounting, legal fees, etc., this compexity equals cost, and much of it is scale-independant. My cost as a small company are a much higher percentage than their's as a large company. Let's not even go there with health care.....

In fact, I'm starting to come to the conclusion that, although quite profitable, my company may not be sustainable, as we don't have sufficient access to capital, and the "gateway rents", i.e. costs to enter the market, being the same for a company my size as a company 10-100 times my size, may not be supportable at the size that I am capable of independantly. So I actually am looking at selling my operation to a larger corporation. It's not what I want to do, but may be forced to. Unfortunately, for some things, you have to be big just to survive.

Hmmm, expanding pyramids, I guess I'm living it/part of the problem?

Submitted by lambert on

It's interesting to consider this as an abstract structure, although since I'm at an undisclosed location I don't have the graphics program that would make this really clear:

The pyramid is a tree structure (like an org chart). Tree structures are subsets of graph structures (like roadmaps).* Networks are sustainable and resilient, tree structures suck resources out of the network in which they are embedded. The top nodes of the tree have no connection to the surrounding graph; only the lowest nodes do, and they extract resources from the network and forward them to the top nodes, which are sinks. So the way to kill the tree is to poison its roots...

Something like that.

NOTE * Tree structures are also fractal.

BruceW07's picture
Submitted by BruceW07 on

I hope we're not going to reduce to:
Networks = good
Pyramids = bad

Pyramids are a type of network relationship: a hierarchical one, a pattern of social organization in which authority is employed to coordinate behavior and arbitrate conflict. They have their limitations to be sure -- chief among them the information bottleneck that can form at the top/center. But, they also have their legitimate uses, particularly in the technological control of production processes, where they can economize on error and waste, and enable enormous productivity gains.

The origin of the acute problem of the American economy is not the "trees", but their disease, a kind of "internal parasite", to use Ian Welsh's metaphor, which has captured control of the corporate "brain", and is using the corporation as a corrupted instrument, to feast, as parasites do, on the weakened, prostrate body of the American economy.

There are important issues, of course, about how the economy is organized, which revolve around, for example, the homogenization and monocultures that hierarchical control seems to promote. This is particularly urgent in food production and distribution, but similar issues arise in all kinds of networks, from software (and the virus plague fostered by Microsoft's Windows monopoly) to transportation. I would not deny that.

What I am saying is that it would be a mistake to completely confound, in our minds, the corruption of corporate governance with the problems of evolving the uses and application of hierarchical control regimes, and conclude that we can, or must, do without this form of social network.