Diffusion of power

I

I was born and raised in Venezuela. Twenty-plus years of Hugo Chavez’s Chavismo left me with a deep suspicion of power.

Add to that Trump’s presidency (and the constant parade of politicians consumed by power before that), the myriad of corrupt and extractive corporate and financial tycoons, and the yearly news of disingenuous religious leaders and the suspicion only grows stronger.

I used to deeply wish for good men to take positions of power - to some degree I still do. For the longest time, I personally wanted to take on roles of power because, naturally, I think of myself as a good person and thought I could do good.

As time passes, I find myself increasingly uninterested by the idea of having power and, more broadly, wishing for all these power positions to concentrate less power. I am increasingly interested in diffusing power, as I believe it to be a very effective way to do good.

In a beautiful brief speech (which I strongly recommend you read) given upon accepting the Sonning Prize, Václav Havel meditated on what drives people to seek power. He identifies three main reasons: their ideas on how to better organize society, the longing for self-affirmation, and the perks.

Havel reflects on how the last two tend to overcrowd the first. He was trying to understand how power slowly becomes a goal in itself and how as power concentrates and tends to the absolute, it ends up corrupting absolutely, as Lord Acton famously said.

As president of Czechoslovakia, every day afforded Havel the opportunity to change the world for the better, affirming his identity as useful and loved by many.

Havel was indeed an essential man: he did not sit in waiting rooms or traffic waiting for the red light to change; he did not cook his meals or place his own calls. None of these things were more important than his daily work of running an entire nation.

These privileges are all fine and well. The challenge is: can we tell when someone crosses the line, from sensical privileges to abusive? There isn’t a straightforward, hard-line. More importantly, can the person in power tell? Well, that’s even harder.

Havel realized that while power affords self-affirmation, in the process, it robs people of their identity. The person who first wanted to limit the influence of power was changed by power. As he sees it: “Someone who forgets how to drive a car, do the shopping, make himself a coffee, and place a telephone call is not the same person who had known how to do those things all his life.”

For Havel, the conclusion is that power is a “job for modest people, for people who cannot be deceived”.

I think this is true, yet it is not nearly enough.

II

How do people accumulate power?

The first way is physical violence, the oldest and most enduring reason, yet decreasingly important, as physical threats are easier to ascertain and economic interdependence lower the payout of violence.

Persuasion and narrative control are also as old as power and growing in importance as new forms of communication provide a global audience.

And then there are economies of scale and network effects, or the benefits of being big.

As with the motivations for getting power, the methods for getting it are also deeply interconnected. And in this case, I believe it is the size and scale that subsumes and overcrowds everything else.

The best explanation I can find for why institutions get big is Coase’s theory of the firm. Coase argues that firms grow when internal coordination is easier and cheaper than transacting amongst different entities in the open market.

In imperfect markets, there is a cost associated with price discovery (benchmarking, negotiating, agreeing on terms). Inside a firm, prices and contracts are easier to set, so functions and products get internalized. As more things come inside the firm, it gets bigger. The bigger it gets, the easier it is to compete with others because costs go down and margins go up. The bigger firms get so does their market share, which reduces the cost of marketing and distribution.

As firms, parties and religious groups get too big, they fail to serve well smaller niches of their markets. This opens the door for smaller competitors, who can thrive caring for a smaller market, or grow to replace the incumbent if the market they serve overshadows the rest.

Yet, when companies get too big, they can cut out the basic supplies needed for smaller competitors to serve niche markets. When that happens, antitrust laws are enacted to limit their power. In politics, voting and election rules can be tinkered with to curtail the most powerful.

Yet laws and regulation are not always as effective as we would like.

In Judaism, there is this idea of building a fence around the Torah.

Following the law of the Torah is at times challenging and yet always so important that more laws are created to keep you from breaking the core laws. That’s the fence: laws designed to protect laws. For the layman, such fences are also built, to keep men from abusing positions of power.

Unfortunately, the more laws are created, the harder they are to follow, which makes it harder to know if you are drawing inside the lines or outside. As complexity increases, laws tend to become harder to follow, and hence more unfair (for how can a law be fair if people can’t understand it).

As anyone who has kids knows, few and simple rules, which are easy to follow and enforce, do better. The challenge tends to be that, in big and complex legal systems, those who make the laws have the most power (that’s how the system got big and complex in the first place). And as power moves from doers to rule-makers, things end up worse off.

III

The right amount of power is like water. Too much concerntration of power and we get ice; a static system that can’t change. Complete dissipation of power and we get a gas; the random bouncing of particles that can’t coordinate. We want power to be, as the Santa Fe Institute crew says, at the edge of chaos; sufficiently well structured that organization and coordination is possible, but suffictly loose that change and learning is constantly happening.

I think we are coming out of an ice age of power. My fellow countryman Moises Naim calls this the end of power. Big nations-states are breaking; since WWII, the number of nation-states tripled. Minority parties continue to grow in number and representation in Europe. We have more primaries than ever in the U.S. Around the globe, there are very few dictators left .

The role of government is being unbundled: Bitcoin is disrupting monetary policy, Gofundme, Khan Academy and the kickstarters of the world are complementing fiscal policy. SpaceX is privatizing NASA.

And yet, executive power is ever expanding in the US, state surveillance continues to increase, and the rise of China represents a massive black hole of power.

Companies stay less time on the S&P 500, CEOs last less on their tenure, popular brands have more dramatic arcs and new technologies are constantly redefining how we do basic things like communicating, eating and moving.

Still, the gap between CEO compensation and average employees is rapidly rising, real wages are stagnant, and inflation in essentials like education and healthcare is rampant.

Tiktokers, youtubers and podcasters are creating one-person media empires, while NYT and the likes are turning into technology companies to better serve (and better ad target) their audience.

As power thaws, some are trying to keep it cool, while others want it to evaporate.

There are jobs to be done in each of these camps. I for one, want to contribute to a productive diffusion of power. To do that, power certainly cannot be overly concentrated, but neither can there be total chaos.

IV

To keep power at the edge of chaos, we need some things to be very stable and dependable, so that other things can be very surprising and unpredictable. Is like life: we need the DNA to be super stable, so evolution can run its experiments, environment and randomness conditioning individuals in all sorts of weird and unexpected ways. There is no individualism in biology without stable foundations. I think this is also true in society, and specifically as it relates to power.

This means that we need a hierarchy: stability, predictability and trust at the foundation vs. change, surprise and competition at the surface.

There are many projects out there today trying to build foundations that allow for the diffusion of power, or supporting agents that diffuse power via competitive means.

Here is a list of some interesting examples:

Financial

Stable foundation: Bitcoin. I believe Hayek when he said prices transmit information. For an economy to work we need prices to do their work. The concentration of monetary policy power in the hand of a selected few nations had led to the abuse of money via debasing. BTC solves for trust and predictability, taking control from the few, and giving it to anyone who wants to participate.

Surprising surface: Fintech generally is an example here. In particular, Aven invented the first asset-backed credit card. Wealth is a virtuous cycle: it accumulates, protecting against inflation, and bringing access to the debt via collateralizing the assets. People without assets are left out. With Aven, people can use a house or a car to get competitive credit terms, leveling the playing field.

Commerce

Foundation: The best counterbalance to the increasing concentration of power of Amazon is not legislation, and is not going back to the past; is Shopify. Allowing more sellers to go independent with a business model that is transparent and aligned helps diffuse power in ecommerce. Shopify is the main component, but there are many more: there are many other pieces where it is hard for an independent seller to compete with Amazon and where other companies can help by setting the right foundations: for example, Returnly provides an Amazon level platform for returning products to any seller.

Surface: Beauty is probably the commerce category that has the most influence on power dynamics. What we deem beautiful influences identities and notions of self-worth. Glossier, a direct to consumer, customer driven beauty brand, that makes it ok to be yourself, is transforming and diffusing power dynamics around appearances.

Social

Foundation: Bluesky wants to build an open and decentralized standard for social media. Social media power resides in the control of wallgarden identities and its connections. If we want to see power diffused here, we need stable standards everyone can trust at the foundation: identity and connections.

Surface: Most social networks have a content wedge. Sure, Facebook and Twitter support video, but Youtube and Tinktok rule it. Different content types yield different networks because different talent and interests are attracted to different formats. Clubhouse created a new type of format - drop-in audio chat. The content types and it’s containers - Rooms - bring a specific type of creator and a unique audience. In doing so, Clubhouse is diffusing power in social networks.

Creative tools

Foundation: A ton of creative tools are native desktop apps, that need the computational power and low latency of the edge to get things done. The creation, maintenance and distribution of these software is expensive, and so power concentrates in a few companies. WEBGL is a key component in rendering graphics on the browser (the browser in turn is one of the greatest power diffusers in technology). The better an open standard like WEBGL gets, the more surprising things can be built without the permission of those in power

Surface: Figma is the harbinger of surprising apps built on WEBGL. A decade ago, It would have been impossible to imagine Photoshop on the web, now all sorts of surprising new things are possible because WEBGL has improved dramatically ( also, paired with the improvements in WEBRTC, real time collaboration becomes possible) .

It is also interesting to think of new powerful platforms disrupting older ones. An example: digital audio workstations are desktop bound and expert tailored; things like Bounce can use the app store, which competes with the desktop, to make DAWs more accessible in surprising and cool ways.

These are just a few which are already happening.

There are many new frontiers opening up for power diffusion: new charter cities to compete with old ones, new voting mechanism like quadratic voting to better reflect the preferences of individual in collective decisions, more radical market solutions to property (I like Weyl’s idea of having houses in an open market, priced by the owner to minimize tax but also to minimize odds of having someone else buy the house From her!). I even think of brain-computer interfaces as a power diffusion technology, in that it can counterbalance the growing power of AI systems.

Stuart Kaufman has a beautiful way of thinking about the edge of chaos. For him the context is biology, but I believe it applies to power as well: “Matter has managed to evolve as best it can. And we are at home in the universe. It’s not Panglossian, because there’s a lot of pain. You can go extinct, or broke. But here we are on the edge of chaos because that’s where, on average, we all do the best”

At times when the alternatives seem to be the conservation of power structures or their complete destruction, I think finding creative ways to diffuse power is an important, interesting, and profitable endeavor.