Proxy Society: Are We Cognitively Equipped for Capitalism?

proxy societyI count the fact that we’re evolutionary mismatched to much of the modern world as one of the most important mind-shifts I’ve had.

One of the biggest evolutionary mismatches is the capitalist system.

We all know that Marxism, Communism, Leftism don’t work. If they did, they would have prosperous companies and happy people. It doesn’t take a genius to understand that if you rob people of their incentive to work hard and create new things…….

……you will end up with a bad society.

So why have those ideologies become popular? Because they’re simplistic and speak to the heart.

Capitalism, on the other side, is complex.

The peasant knew the order of things, the power structure. He knew the king and priests were in charge.

We now live in a proxy society, with layers upon layers upon layers, where the meaning is hidden from us. Capitalism rewards specialization and division of labor. Compared to the 18th century handyman (who did everything himself), most aspects of the work process are now hidden from us. I know a girl whose only job is to file reports. The employees in a big global company are rarely aware of the entire value chain or how they contribute to the whole.

Karl Marx wrote of 4 ways that the worker was alienated from his work:

  1. Alienation from their product
  2. Alienation from the act of production
  3. Alienation from species essence
  4. Alienation from other workers

The way to prosper in a proxy society is to become smarter and master Higher Order Thinking.

But it’s hard and bothersome to think. It will not be done unless there is some meaning and curiosity. In a proxy society, the only ones capable of producing their own meaning and curiosity–their own Sense of Awe–are those who have a strong PFC, or instilled with a mission from birth, like the Phantom. The strong man does not need formal religion, he creates his own philosophy.

A Forest Encounter

Recently, as I have begun work on the Updated and Expanded version of BOOH, I’ve kept mostly to myself (so that my ideas will not be disturbed). I have kept strange waking times and gone on solitary walks in the middle of the night in forests.

On one of these walks I came upon a small encampment of vagrants & beggars. They had collected big heaps of items (most likely gathered from city trash bins or containers) and they had dug a big hole in the ground and used it for disposal of rubbish. To my dismay it was full of plastic and glass items.

I thought to myself: These people are badly adapted to capitalism. They’re like aboriginals going on scavenger hunts in foreign territory. Then I thought, they are Homo Sapiens and so am I. We’re all just a bunch of animals. That we somehow invented technology, machines, and global markets…. it’s staggering, and quite amazing. But kill off everyone older than 7 years old and it would all go away, and so would collective culture.

Now, while those forest people are extreme social misfits, I don’t think it’s unreasonable to assume this is the “default”. It’s compelling evidence we humans don’t come naturally equipped for making a living in modern society.

The world is complex and capitalism is hard to understand.

Why, I was out to a pub the other week and this old couple came by asking if they could sit next to me (the place was full). I said sure, go right on ahead. They started telling me all sorts of things…. like how they felt it was unfair that young people could make as much money as they did, who had 30 years of experience, as a school teacher and an army doctor.

I can understand how they might feel that way. Put yourself in their shoes. They’re in their mid 60s and they still don’t understand how capitalism works. They didn’t know about supply and demand and bargaining position. And yet, they had both gone to university…. done what they were told to do…. and worked ever since. What else is expected of citizens? I’m sure they read the newspaper every day to stay well informed.

Did you know Jeff Bezos made more than 80 Billion Dollars this year? On paper, of course.

Who Succeeds in Capitalism?

I was reading the book Lords of Strategy the other day. It’s a book by Walter Kiechel, former Managing Editor of Fortune Magazine and Harvard Business Review. LOS gives you the nitty-gritty on the 50-year history of Strategy Consulting (BCG, Bain, McKinsey). There was a segment that caught my eye:

“….[Coca Cola] CEO Roberto Goizueta would tell Fortune in 1990 that he pondered how to improve value for shareholders “from the time I get up in the morning to the time I go to bed. I even think about it when I’m shaving.”

I don’t know about you, but there’s something about that statement that strikes me as unnatural.

This is what I mean when I say capitalism is a “proxy society”. It’s like you’re living for someone else. Cavemen didn’t have shareholders to think of.

Most people don’t think like Roberto Goizueta. And I think that it would take a serious readjustment if you wanted to think like Roberto Goizueta.

Capitalism is a Tricky Concept for the Human Brain

If this wasn’t the case, then how do you explain the popularity of leftist doctrines?

The invention of money and markets may be mankind’s finest yet. BUT!

We need to humble ourselves to the fact that humans are evolutionarily mismatched to capitalism and global markets.

The road ahead will not be easy, but they are here to stay….

I leave you with this quote by serial entrepreneur Ola Ahlvarsson:

I think it’s extremely important that if you can understand and agree that you need to develop your own way of understanding the world and embrace more complexity, that is super important, if we are to have a good society…. Depression is going up like crazy. Sick leave too. And so forth. All of these things are functions of us not having the tools and leadership to manage a more complex society.

What do you think?

There are lots of classes in school. Why not add one called “how to live long and prosper in the capitalist system.”

We all take it for granted that we know what Capitalism is, but when did you last read about it?

Capitalism is a proxy society.

proxy society

Think of it: 

We have fiat currency.

We have tricky financial instruments: derivatives, collateralized debt obligations, etc –that point to something else.

We have companies and boards of directors, to represent shareholders.

We have a value chain of increased complexity and abstraction, with added layers of specialization.

None of this is straight-forward. It’s all higher order thinking. I went to lunch the other week with Martin Sandquist and ran some of my theories by him. He said to read up on Common Knowledge.

Capitalism is by nature a proxy society because the free market–to the extent it can–delegates responsibility to whomever bears it best and makes the biggest profit.

That’s a good thing from an efficiency standpoint, but it’s gotten to the point where the human brain can no longer keep up, without significant training.

It’s so tricky that everyone can pass the buck! Owners make a mistake? Put it on the CEO, he deserves his severance package. Central banks always blame it on someone else. Government leaders pass the buck regularly.  Now who’s in charge of all this?

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Comments

  1. The thing most people do not understand is monetary policy and credit markets. Whenever I want to understand anything in finance or economics it’s the first place I look.

  2. “Any two people on the planet can exchange value privately without proxies.” – No. They can exchange imaginary quantities devoid of value. Even a fiat currency has /de facto/ intrinsic value – you can pay taxes with it. I don’t foresee bitcoin ever being made a legal tender.

    I don’t know where this nonsense about robots keeps coming from – weren’t the Jetsons canceled? Aside from the fact that a general-purpose human-replacing robot is as far away now as it was fifty years ago, why would anyone want such a thing when humans are cheap?

    But if automation did cause in “massive layoffs”, how would this result in “universal income”?

    Here’s something a lot easier than replacing all (or nearly all) humans with robots and then searching for ways to feed the exploding population: eliminate all (or nearly all) the humans that are irrelevant to the needs of emergent global AI.

    • Chill mate. Here are your answers.

      Bitcoin
      It doesn’t need to be made a legal tender and you don’t have to pay taxes with it to be useful. You can’t pay taxes with gold can you. I don’t see it as replacing fiat, but just being there as an alternative, holding some value and being a safe haven against government induced inflations. If I can pay you in crypto and you can pay your hosting bill with it or exchange it for dollars then what’s the problem.

      Robots
      We aren’t any closer to general AI but we are closer to self driving cars aren’t we. We don’t need general AI for the things I mentioned. Humans aren’t cheap, that’s ridiculous. The speed of work is 100s of times slower and the error rate is orders of magnitude greater.

      The universal income
      The things that get automized are going to get much cheaper and affordable to everyone. By universal basic income I mean basic things for survival will be available to everyone.

      And it’s not like you need one robot to replace one human. That’s also 1:100 or 1:1000 robot to human ratio.

  3. Hi Ludvig,

    Thank you for writing this up, it was a very insightful read.

    I think what we can all learn from your article is that it’s super important to learn first principle thinking and understand the reason, the why behind our current system.

    Take for example:
    —“The employees in a big global company are rarely aware of the entire value chain.”

    Would first principles thinking help employees understand the entire value chain?
    —Most likely, but it would require them to proactively search for the meaning and underlying reason behind the value chain itself.

    Maybe first principles thinking can even decrease unemployment rate? A worthy question for further research.

    And btw, this is my favorite quote:
    “Cavemen didn’t have shareholders to think of.”

    Thank you once again Ludvig

  4. This paints a dark picture for the present and the future that I don’t agree with.

    I think only people with socialist conditioning can’t fathom Capitalism. It’s ok to be a specialist. Let’s have 10 or 20 or 30 specialists in a company and then let robots do the rest of the work.

    Regarding the layers of society
    With the advancement of the Internet more and more layers are coming down in terms of company structure. The Internet broke the Media barrier, it connected all of us. Cryptocurrencies are tearing down the layers of the financial system, the Internet of Money is being developed. Any two people on the planet can exchange value privately without proxies.

    Now a 10 person company can have millions of users and make millions in revenue while all 10 people are directly involved with the product, all specialists, no proxies.
    Currently this is only true for software companies, but robots will become more and more affordable and we should be able to rent them out just like we rent hardware on the cloud.
    This can cause massive layoffs and probably a universal income for everyone once the robots can produce food, build buildings and transport things autonomously.

    But then how are you going to convince people to work for you?
    Very hard, because you would be recruiting for high level positions. People that can make stuff happen by themselves. So you have to sell them the mission and then give them a percentage as well.
    So ideally all companies would be with less than 100 people, everything else automated. This is just me being optimistic.
    But to be real, consumerism is very hard to ignore. So even with basic income people would want to have more than their neighbor and would still accept some lower level jobs.

    All in all, we have an amazing but dangerous opportunity to automate all the boring stuff and only do the work we like to do. Yes many problems can arise in this process and we must be careful. But I hope to live in a society like this some day.

  5. I think you have a point. It is the increased complexity of the world that causes the neo-paganism so prevalent in the world now, particularly visible to those of my generation and older.

  6. In the big capitalism might be the only way forward as we have it right now, the only way technological inventions prosper in. But one of the big biological miss matches here is the greed as well, much is never enough. Just look at the climate and there is always someone in this world who is getting used for our own advantage in western society to get companies even bigger and to earn a billion more, we use those people preferably somewhere where we can’t see it or we forget about it.

    The world is way too complex now and people forget to be humble and live for themselves. Our own happiness is the most important.
    Sometimes one can think that no one really knows anything that makes this world go forward.

    Both right capitalists and all leftist people are completely in the mist.

  7. I don’t think that the appeal of certain ideas and policies – “Socialist” inspired or otherwise – to certain people is related to the simplicity of ideologies or economic systems. Those people have no more understanding of Socialism than they do of IMF policy, or Soviet housing allocation, or neutron absorption resonances. In fact they may declaim a simplistic free market ideology – until their self interest is concerned.

    The policies that they favor are those designed to appeal to their perceived self interest or their emotional problems, and it is only then that the most grotesque simplicity becomes an advantage. Can’t get a job? Build a wall to stop immigration. Workers on strike? Send troops to disperse them. Government in debt? The answer is obvious – raise taxes on someone else. Or cut spending on programs you don’t want. Can’t pay your bills? Government’s got deep pockets! Lack self respect? The government can
    force everyone else to respect you… etc.

    Such crude “solutions” generally involve the arbitrary invocation of government authority, but are not always Socialistic. Douglas MacArthur wanted to settle the Korean War by nuking China. No industry objects to subsidies for itself. Some people want a return to the “gold standard” to cure inflation.

    Socialism /per se/ is not at all simple; it is a complex and varied family of ideologies, ranging from Anarchism to Maoism to National Socialism, and can certainly incorporate proxy relationships (e.g. Stalin’s representation of Lenin’s New Economic Plan as a proxy for Capitalism in the application of Marx’s Dialectical Materialism to Russia). Free market ideology seems much more homogenous.

    The concept of “capitalism” is far older than either, and doesn’t even necessarily imply the existence of “free” markets – only of markets in which capitalists may use their accumulated buying power (capital) to gain advantage. These markets – and systems of transport, credit, money, insurance, investment, taxation, etc. – were surprisingly complex centuries before the first Physiocrat ramblings. The numerous restrictions, taxes, monopolies, etc. certainly did not reduce the complexity.

    Bolshevism promised to solve the problems of market economies by cutting the Gordian knot and simply declaring what will be done: Lenin thought that the whole management of the economy could be a reduced to a matter of “checking and accounting” carried out by any literate worker – until he had to actually run the country. The “Communist” system turned out to be even more cumbersome than the ideology. People who find “Socialist” solutions simple aren’t Socialists.

  8. It seems like the circle is going full end for you. I cant put it in words but it seems you are at the pinnacle of some big insight.

    I recommend the book Daily Rituals, maybe it can make you get more on tuned by trying a new Ritual.

  9. The world is more complex than we like to believe, as I often think myself.

    Thanks for the new article!

    Are you going back to regular posting?

  10. How do you embrace more complexity and learn to think with more nuance and details?

  11. Interesting thoughts. I agree that the capitalist system is complicated. It’s like a big machine that we live in and it just seems to work even if we don’t get it.

    I look forward to finally getting BOOH in print. When can we expect it?

  12. This is a very good point like your old Gauntlet post. I can only agree and applaud. Thank you for rising questions I had not thought of.

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