Monday, July 5, 2010

Why Corporations Matter, Part I



The Antikythera clockwork was a mechanical device, made of bronze and iron gears, that was manufactured by the ancient Greeks in the second century B.C. It was lost in a shipwreck around 150 B.C., and recovered from the bottom of the Mediterranean in 1900. But it was only in the last couple of decades, with the help of sophisticated imaging equipment, that scientists have realized what the rusted hunk of metal actually is:

The Antikythera clockwork is a computer. And a very sophisticated and exact one at that.

It was used to predict eclipses and other astronomical events. Because of its complexity and design sophistication, it probably wasn’t a one-off: The Antikythera clockwork was likely the culmination of at least a few decades’ worth of development by the ancient Greeks—which means that whoever made the Antikythera clockwork had the knowledge to make other, exceedingly useful devices, including clocks and calculators, with a myriad of practical applications.

Nevertheless, the technology that made the Antikythera clockwork possible was lost—it was only in the XIII century that mechanical clockworks were developed in Europe once again. Something to compare to the Antikythera clockwork in complexity, sophistication, compactness and accuracy did not come to be until roughly the XVI or XVII century, depending on your metrics—1,700 years after the ship carrying the Antikythera clockwork went down.

Why was the technology lost?

Actually, that’s the wrong question: Vital bits of knowledge and technology have been getting lost all the time, ever since human beings figured out how to make their own food.

The real question is, Why has technology been preserved and accumulated so effectively over the last four centuries of our current civilization? Why now, and not before?

Think about it: Human beings developed agriculture roughly 10,000 years ago, which created the possibility of settlements and therefore a civilization. Yet every civilization has risen, plateaued, and then fallen, and ultimately their technology and culture have been for the most part lost. Even exceedingly practical bits of knowledge have disappeared, not to mention great art and literature.

The Antikythera clockwork is just one of countless examples, large and small, of lost technology and culture. The development—and just as importantly the maintenance—of technology and culture have been literally Sisyphean tasks. Ziggurats were built in Mesopotamia some 7,000 years ago—then all that knowledge that went into their construction was lost. A thousand years later, ancient Egyptian engineers had to start from scratch when they decided to build their pyramids—then their insights and expertise were lost too, by the time the French got around to building that canker sore in front of the Louvre.

The fact that technology and culture have been constantly lost hasn’t meant that there haven’t been efforts to preserve them. On the contrary, there have been constant efforts. Libraries have been built to preserve art and literature—but then they burned. Guilds have been created to protect crafts and sciences—but then they fell apart.

In fact, when you look at it from this perspective of knowledge preservation, since A.D. 387, the Catholic Church is the only institution which has systematically preserved knowledge across borders and time—but that preservation was of necessity piecemeal; static; and excluded any bit of technology, culture or knowledge that contradicted the Church’s teachings. That’s why, for instance, so many of the racier plays of Sophocles were lost.

That’s also why pure science didn’t progress very much, between A.D. 387 and A.D. 1602. Apart from technology related to warfare, trade and other practical affairs, the Church was a stopper on pure scientific development. Just ask Galileo.

Nevertheless, our current civilization owes a tremendous debt to the Catholic Church. Were it not for the Church, after the fall of Rome, Europe would have descended even further into barbarism than it did. Without the Church, nothing of the Greek and Roman civilisations would have been preserved. But the Church’s cosmopolitanism, coupled with its monasticism, created an archipelago of knowledge across a uniformly ignorant Europe between A.D. 387 (the Gauls’ sacking of Rome) and A.D. 1317 (the likely publication date of Dante’s Inferno), when the Renaissance began.

However, it’s with the Enlightenment starting in 1602 that, suddenly, we have had a geometric progression of technological development: Technology building on technology slowly at first, but then accelerating in a smooth, uninterrupted curve. Indeed, the very idea of “progress”, so reflexively familiar to us today, so never-ending in our imagination, didn’t even exist until the Enlightenment.

This notion of open-ended, never-ending progress has only been possible because there has not been significant loss of technology since the start of the Enlightenment.

People might object and say that technology was lost before the Enlightenment because there was war, disease and famine—but there’s been plenty of war, disease and famine since the start of the Enlightenment. Yet we’ve somehow managed to hang on to our progress.

The question is, Why? Why has there not been a substantial loss of technology and culture over the last 400 years? It’s happened in every other period of history, in every other culture in history—except in Europe, starting about 400 years ago, and spreading out of Europe to eventually encompass the world.

Why?

I’ve been bitching about corporations as of late—I’ve been bemoaning the current era of corporate anarchy and “street-gang corporatism” that seems to have enveloped our society. I’ve been openly wondering whether the United States is descending into a fascist police-state ruled by corporate interests.

But that doesn’t mean I think corporations are the root of all evil. Quite the contrary:

I posit that the invention of the corporation made the progress of our civilization—and the explosion of humanity’s numbers—possible. I would argue that without corporations, the Enlightenment would not have happened, and the civilization we currently enjoy would not have come into existence. I would further argue that, without the concept and practice of the corporation, today we would be living the bad bits of the Middle Ages.

(And you thought I was a tree-hugging, Birkenstock-wearing foo-foo Alterna-geek loser who ends every statement with an interrogative: “It’s 50 degrees Celsius in the shade? So I think it’s hot? But I’m not really sure? It’s just my opinion?”)

Though I think the idea of the corporation was a necessary condition for the development of our civilization, it wasn’t a sufficient condition. In other epochs and cultures, versions of what we could consider corporations have existed—but those civilizations weren’t able to parlay their versions of corporation into what Europeans and the West did: Corporations as a knowledge and technology preserver and aggregator.

Before continuing, let me define what I mean by “corporation”:

I am not referring to mere “companies”—that is, partnerships or syndicates of merchants or adventurers who band together to pursue a common enterprise, an enterprise which they lack the means to pursue individually. Partnerships have existed since forever, syndicates since the Roman times (if not earlier). Chartered companies began roughly in the mid-XVI C. in England and Holland, though of course there were random examples in isolated spots in the centuries before that.

But corporations began in 1602, with the Dutch East India Company (Vereenigde Oost-Indische Compagnie, or VOC; literally “United East India Company”). The VOC was established in 1602, as a competitor to the British East India Company, which had been chartered in 1600. Both companies were spice trading syndicates which had received government monopolies to trade in the Far East.

The Dutch East India Company, however, is the first true corporation because of two key difference from its British counterpart: One, the VOC was the first limited-liability corporation; that is, its financial exposure was limited to the capital contributed to the company, and no more. And two, the VOC was the first company where the participanten (non-managing partners) could sell their participation in the company by way of their anonymous stock. The Amsterdam stock exchange—the first and oldest in the world—was founded specifically so as to trade in those VOC stock.

VOC’s organisational model became the template for all future corporations—and to my way of thinking, this development was the starting date of the Enlightenment, and a turning point in world history.

(Parenthetically, when I speak of “corporations”, I am not referring to giant multi-nationals exclusively, or even implicitly. I’m simply referring to any company whose owners have a limited liability, and whose stock can be traded. In my own mind, I’m imagining a small glass factory which employs about a hundred people, whose penny-stock is publicly traded. Furthermore, when I speak of “company”, I’m referring to any organization of more than one individual, coming together in pursuit of a business or other venture; by this definition, a corporation, a syndicate and a partnership are each a different type of company.)

Cynics view corporations as money-making machines. But that’s just stupid. Corporations—of whatever size—should be viewed as two things: One, productivity engines, designed to produce a specific good or service, while disregarding anything and everything else, so as to satisfy a demand in the society. And two, as repositories of assets, both tangible and intangible.

It’s the second issue which interests me right now: Corporations as repositories of assets.

Before the VOC, commercial enterprises depended on particular people—the cobbler’s business depended on the cobbler himself, and his actual work, and the work of the apprentice cobblers he might have working for him. A partnership depended on specific people working together for a common goal. If one of those people left or died, the partnership was dissolved, or at least had to be severely restructured.

It was quite normal, before the VOC and corporations, for a business to rise, plateau, then decline, and then ultimately vanish—along with all of the business’s accumulated expertise. That is, presumably, what happened to the makers of the Antikythera clockwork. Ambitious men have been forever trying to get their sons to follow the family business they spent so much time, effort and tears nurturing and growing—only to have their hopes dashed when their sons turned out to be uninterested, or even worse, incompetent.

But starting with the Dutch East India Company’s stock, people could take an active interest in a company for a limited time, before passing on the ownership of the corporation to someone else by way of the sale of stock.

Who would take over the corporate entity? Obvious: Someone who was interested in building it up.

People are not single-minded. People like to talk, hang out, fuck, laugh, play, read a book, etc. But corporations are productivity engines. They are supposed to do one thing: Carry out the business of the corporation.

When people are interested in the business of a corporation, they participate in it via stock ownership. The corporation’s interests and the stock owner’s interests align, and both benefit. When the stock owner’s interest flags for whatever reason, they can sell off their ownership in the corporation to someone else.

Thus the corporation and the owners are meeting each other at the moment when they are of most use to one another. And when the owner leaves the business (ie., sells his stock shares), it’s not just that the owner is “cashing out” when he’s no longer interested in the business: It’s that the corporation is continuing on with a new and interested owner, who will use his best efforts to maximise the business of the corporation.

The benefit of the stock sale is not only to the stockholder, but also to the corporation. Because the corporation is leaving behind an uninterested owner, and continuing on with a new stockholder—a new owner—catching this individual at the peak of his interest in the business of the corporation.

A good way to think of this is, the founder of a corporation is like a man who builds a cart, out of scrap metal and wooden planks. He pulls the cart forward, loading it up with whatever he finds along the way, constantly improving his cart, until he reaches a point where he is either too old or too exhausted or simply too uninterested to continue pulling the cart—so he sells it to someone else.

This new owner also improves the cart—she puts new wheels on it, maybe she installs an engine so she can drive it instead of pull it, and so on. Maybe she comes up with ideas to improve the cart that the previous owner could never have imagined—say she replaces the wheels with rockets, and attaches wings to the cart. But then finally, she too is no longer interested in riding the cart—so she sells it on to someone else.

The successive owners have benefitted from the cart—they’ve sold it at a profit to each new owner. But then, the cart itself has also benefited from each sale. Every new owner has improved the cart in some way or another. And human ingenuity being what it is, these improvements have often been in radically unexpected ways. Since the cart—the corporation—is in a practical sense immortal, in theory it can be improved upon infinitely, as it is passed along from owner to owner.

Unlike a pre-modern partnership or any other sort of company lacking in a simple ownership transfer mechanism, a corporation is never dissolved or wound down when an owner decides to exit the property: Rather, the corporation is merely passed from owner to owner by way of its stock sale.

Some owners might decide to break off productive units of a corporation and sell them off—maybe the corporation is a conglomerate, and the new owners decide to break it apart until there’s nothing left. The conglomerate itself might disappear completely—but those productive units that made it up live on with new owners. Gulf + Western would be an example.

A corporation might even go bankrupt—in fact many small corporations do. But if the corporation is of a size where its productive units are individually viable—say one of its factories that produces doo-dads is still a money-making venture—then the corporation’s owners’ stock will be wiped out in a bankruptcy, but the corporation’s productive units will be sold off to pay its creditors. Those productive units will continue to exist through time, with new owners who will improve them.

So then what are these “productive units” that I’m speaking of? The productive units are what carry out the business of the corporation—but that’s no help at all. Let me rephrase the question: What does a productive unit have that makes it worth keeping, as opposed to dismantling it into its component parts—tools, trucks, desks, chairs, etc.—in a bankruptcy? To rephrase again: What is the thing that holds all the assets of a company together, and makes it worth more whole than dissolved?

Or to rephrase yet again: What is the soul of a company?

An apocryphal story: Sir Walter Raleigh bet Queen Elizabeth that he could measure the weight of smoke from a cigar—a seemingly impossible feat. He took a fresh cigar, carefully weighed it, then smoked it, making sure to tap all his ash on the scale. When the cigar was consumed, he weighed the ash and the remains of the cigar—the difference between that weight and the weight of the fresh cigar was, he claimed, the weight of smoke. He was right, too. Just because you can’t catch it, doesn’t mean it’s weightless, or immaterial, or nonexistent.

I said before that a company is a repository of assets, both tangible and intangible. The concept of tangible assets is pretty obvious and straightforward. The company accumulates and owns buildings, trucks, chairs, desks, tools, paperclips, whathaveyou. Those things are the tangible assets of any company.

The intangible assets, however, are trickier. On the one hand, there are monetizable intangible assets, such as patents and copyrights, or specific permits or warrants, and of course professional services. There are also stocks and bonds and other financial assets. These are all intangible assets which can be bought or sold or hired; hence they are monetizable.

But then there is another intangible asset which cannot be quantified or monetized, yet which undoubtably exists, and has real value—like Raleigh’s smoke. This non-monetizable, intangible asset is accumulated through the ordinary activities of the company, and is essential to the company’s existence through time. It is the way in which the component elements of a company are arranged between one another—the way in which tangible and intangible assets are arranged and interact. This seemingly weightless smoke—which is essential—I will call the structural asset of the company.

The structural asset of the company refers to the way that the company is internally organized, in order to pursue its business and satisfy the demand by society for its products. It is the thing that makes a company worth more than the sum of all its tangible and intangible assets.

To make this concept clear: A human body is made up of 43 kg of oxygen, 16 kg of carbon, 7 kg of hydrogen, 2.8 kg of nitrogen, 1 kg of calcium, 780 g of phosphorus, and about a kilo of various other elements. If I gather these elements together, and then dump them all in a tub, do I wind up with a 70 kg person? I should, shouldn’t I? After all, those elements I just mentioned are what make up a human being’s body, in those amounts that I just listed. If I gather them in a tub, and mix them up, a fully formed person ought to pop out, shake my hand, and join me for lunch at the restaurant down the street—right?

Of course not—what’s lacking here is the structure of the body: The way those elements are arranged internally. I can have all the elements that make up a human body—but not have a human body.

Similarly with a company: The machine tools, the trucks, the patents, the services of various workers, the copyrights, the paperclips—those are the component elements that make up a company. But they are not the company. What they need is the structural asset of the company, to arrange those component elements into a viable business.

It cannot be monetized or measured, and it cannot be transferred—it is inherent to the company. The structural asset of a company is constantly being accumulated and expanded through the business activity of the company. It is the thing whose decay leads to the entropy of the company. It is the thing which makes the company worth more than its constituent assets.

The structural asset of a company makes it possible to replace one tangible or intangible asset for another, without losing the company’s identity. That is, it allows a company to swap an old machine on the factory floor for a new one, a new worker for a worker who has left, and still remain what it was. Just as, say, a lung transplant for John does not mean that John ceases to be John and is now Frank, the structural asset allows a company to change machinery and people and locations and even businesses, while maintaining its identity through time.

The structural asset of a company is the mechanism that allows it to accumulate knowledge.

But up until 1602, companies whose owners died or lost interest were dissolved or wound down—thus was the structural asset of a company lost. Which meant that the accumulated knowledge was lost too. That’s why the technology behind the Antikythera clockwork was lost for 1700 years—since there was no mechanism to pass on the accumulated knowledge inherent in the structural asset of their company, once the owners lost interest in the business or died, all the accumulated technologies they had developed were lost.

However, I argue that with the founding of the Dutch East India Company in 1602, such loss of technology stopped happening. Owners who lost interest in the business for whatever reason could sell their stock in the corporation—and thus the corporation lived on, continuing to preserve and accumulate knowledge through time with other, more interested owners. Thus was technological development out of Europe a geometric progression.

This also explains why other cultures and empires, more civilized and advanced than Europe in 1602, were left in the dust a mere two hundred years later, and have been struggling to catch up to the West ever since. Think Japan, China, and the Ottoman Empire in 1602: Far superior to Europe, one and all. Now think Japan, China, the Ottoman Empire in 1850: Far behind Europe technologically, struggling to compete, and only able to once they had imported the concept of the corporation.

Had the Greek manufacturer of the Antikythera clockwork been a corporation instead of (likely) a tradesman with a few apprentices, the technology of the Antikythera clockwork would not have been lost. In fact, that technology would have been built upon as subsequent owners of the Antikythera Clockworks Corporation would have added and expanded its business, before selling on their stock in the corporation to some other owners, who would themselves have improved the corporation.

That did not happen—because corporations did not exist. There was no efficient ownership transfer mechanism which would maximise the benefit for both the seller of the company, and for the company itself. But once corporations came into existence in 1602 in Europe, we have had the smooth uninterrupted material progress I spoke of earlier, and which we enjoy today.

This is why corporations matter. This is why they are an essential part of our current civilization—above any religion, second only to the individual and the state.

In fact, the relationship between that triumvirate is the main issue in our current society—how corporations, individuals and the state can and should interact.

But that’s for another post.

31 comments:

  1. I don't think you can accumulate the necessary knowledge to build an Antykera without the previous invention of writing.

    Similarly, you can't make enough copies of that knowledge in a cost-efficient manner in order to propagate and preserve such knowledge, without the previous invention of the print.

    The print is the missing element in your post.

    Diego Méndez

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  2. Gonzalo, I agree with Diego. Also, I think knowledge would transfer just the same if all corporations were instead reformed as partnerships.

    Introduction of mandatory education (to age 16 or so) probably also helped in the past 100 years or so.

    >> This also explains why other cultures and empires, more civilized and advanced than Europe in 1602, were left in the dust a mere two hundred years later,

    Without modern communication (and "print"), different civilizations won't all develop the same technology at nearly the same time.

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    Replies
    1. Mandatory education has had a negative effect on invention and knowledge.

      It has, however, increased the utility, and the interchange-ability, of the serfs.

      Delete
  3. Corporations are just as liable as any other agent in losing and destroying technologies. How many of us here know how to handle a horse safely? whatever happened to the centuries old skills of London dockworkers?

    What ever happened to the battery technology GM developed for its first electric vehicles?

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  4. Bravo! A persuasive case, well argued. We shall await the subsequent posts with interest......

    ps papicek: 'what ever happened to the battery technology GM developed for its first electric vehicles?' RESPONSE: it sold this business to China in 1996

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  5. You're assuming, though, that when a corporation dies, someone will find the productive units worth saving. If no one does, then the technology may be still lost. Consider a recent example: Polaroid. For various reasons (both market and legal), Polaroid went bankrupt and their film products went off the market. There was still a small, but very active, market for their products. Now there is 'The Impossible Project," trying to recreate Polaroid's SX-70 films. They have a Polaroid factory and some former Polaroid engineers working for them. And it's still not enough. Part of the problem is that the knowledge is not anywhere but in the heads of the people who made it. It's not in the manuals, it's not in the patents. And when they stop working, it's gone. When craftsmen don't pass down their skills, they're gone. In other words, the corporate market preserves technology, but it's just as selective about it as the Church was, just the reasons are different (profit instead of theology). While there's no question in my mind that the invention of printing helped spread and preserve information, even books have their limits.

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  6. Very interesting piece. The tie-in with the Catholic Church (the body of Christ), "corporations" (literally "embodiements"), and continuity (perpetuality, immortality?) is an interesting angle. Even more interesting is that the modern corporation is secular and has protestant roots.

    My own opinion is that there has been an erosion of the public purpose rationale of corporations, and a general acknowledgent that shareholder democracy through formal rules of corporate governance is really just an afterthought to the basic buy/sell decision of whether someone wants to be a shareholder or not.

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  7. Justin Michael WeleskiJuly 7, 2010 at 4:05 PM

    I think you make a very thought-provoking point and there is certainly truth to what you have written, but I’m not sure if I would ascribe quite as much praise to the corporate form of business as you do. Basically, I think corporations can more appropriately be considered facilitators. However, even in the function, they only played a limited role. [Preface: I do not, by any means, claim to be an expert in this field.]

    To state my case very plainly; corporations played an important role in enabling technology and accumulated knowledge to transcend borders. Instead of merely retaining technology and knowledge within the borders of an empire or civilization (most of which have died out, been sacked, been conquered, etc.), the corporate form enabled (along with royal decree and funding) global exploration. This exploration, while initially based around the trade of commodities, e.g., spices, sugar, gold, silk, etc., managed to, in time, integrate much of the world into a global community.

    Prior to this integration, a citizen of the Roman Empire and a citizen of an ancient Chinese dynasty almost literally lived in different worlds. There was almost no communication between the two and no significant proliferation of technology and knowledge (e.g., if I remember correctly, the Chinese developed paper and guns long before much of the rest of the world). Anyway, the point is that when one of these remote civilizations/empires/dynasties/etc. died off, was conquered, was sacked by foreign invaders, or was burned to the ground, their technology and accumulated knowledge essentially died with them (or was almost surely set back numerous centuries).

    Corporations, far from being the ultimate store of technology and accumulated knowledge, were simply a means to connect previously disconnected “islands” [i.e., civilizations] and ensure that the demise of one civilization/empire/dynasty did not ensure the destruction and loss of their technology and accumulated knowledge.

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  8. Justin Michael WeleskiJuly 7, 2010 at 4:06 PM

    (Part Two)


    As an example, let’s assume for the sake of discussion that the modern firearm was first produced in England. England, being the globetrotting empire that it was, carried these weapons to the ends of the Earth in search of new resources, markets, and people to subjugate. It armed a select few of the locals in hostile territories and sold large amounts of these weapons to allies in other areas. Whatever the method, these weapons proliferated throughout the world. In a sense, the seed had been planted.

    At this point, the sudden demise of England would not mean the end of firearm technology. Not only would individuals in foreign lands (and members of foreign civilizations/empires/dynasties) still physically possess these weapons, but the intelligent and mechanical members of their group would almost certainly be able to reproduce (or perhaps even improve upon) these weapons in some fashion.

    Thus, while England may initially have been the only nation that possessed modern firearms, the proliferation to other nations/empires/dynasties is what ultimately enabled to firearm to last until the present day.

    Corporations certainly played a role in this process and they certainly CAN retain technology and accumulated knowledge, but they are no more permanent than the nations from which they receive a charter. In other words, the British East India Company and the Dutch East India Company are ultimately tied to the fates of their respective nations if they do not cross national borders. For example, a corporation in the ancient Mayan civilization, despite the fact that it would have been an excellent means to accumulate knowledge and technology, would ultimately have failed to store this knowledge and technology for future generations/civilizations if it had not left its own borders. It would have, like the civilization in which it resided, disappeared, and taken all of its accumulated technology and knowledge with it.

    Ultimately, it is these transnational ties that have enabled accumulated knowledge and technology to persist until the present day (and beyond). Globalization is, in regard to the proliferation of knowledge and technology, a one-way street. Once the cat is out of the bag and has been transported to all corners of the globe (whether the facilitator be a corporation, war, television, the internet, etc.), the seeds have been planted and cannot be dug out entirely (and eliminated) without a worldwide die-off or a massive coordinated effort to scrub the human mind and record clean of this knowledge/technology. This can be contrasted with a pre-globalized world in which countless technologies have been erased from the pages of time due to the collapse of a civilization, wars, pillaging, a coordinate effort from religious or royal authorities, etc.

    Anyway, that is a rather long-winded way to say that while corporations may be one, of many, facilitators, I don’t believe they have quite the importance you ascribe to them. Globalization is, at least to my mind, a far more powerful and effective preserver of technology and accumulated knowledge. It is the reason why the last four-hundred or so years of human history have been a relatively straight line of technological progress. It is the reason why all corporations could be abolished tomorrow yet George Orwell’s 1984 or the Declaration of Independence would almost surely live for countless centuries to come (assuming we don’t experience a massive die-off or some other unforeseen/unforeseeable disaster, which is, I would argue, a relatively big assumption).

    Enjoy!

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  9. I think that it would be separate out what a "good" and "bad" corporation is.

    Corporations that exist thru their close proximity to the federal reserve (Goldman Sachs, JP Morgan), should either go away or be rechartered/relocated. Meaning, it does not take a conspiracy theorist to realize that they have special relationships with the FED that give them not only special "powers", but also an inside track on future FED actions.

    Corporations that exist due to their political influence (GM, GMAC (aka Ally), AIG, etc) need to be wound down and solve at auction to other market participants.

    In short... Corporations are only hated because a few are exploiting the system. Wind down those players, and the public as a whole will have no problems with them.

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  10. Interesting but, to quibble:

    1) um, hullo? Byzantium? Or does the splendour of the Rome of the East count for nothing if some early Popes were scratching around the ruins of Rome in the West? The Roman Catholic church was the poor relative for much of 0-1000 AD. And you should thank the Caliphs of Baghdad and Cairo and Andalucia for preserving the knowledge of the Greeks (and transmitting the knowledge of the Persians, Indians etc.) when Byzantium fell.

    2) Corporations have been around a lot longer than you credit. The colleges of Oxford and Cambridge are Corporations, as were the collegiate churches from which they stemmed, as is the government of the City of London (and as were many other boroughs in England) and the Inns of Court and the Guilds. A college is a corporate body comprising the Master, Fellow and Scholars and has all the rights of a natural person - just like a modern corporation except they are the creation of the King by letter patent. The earliest Oxbridge colleges date from the 14th C. (The Corporation of London and the Inns of Court may be even older and the Deans and Chapters of cathedrals like Canterbury date from 600 AD). The interests of the college members cannot be traded but Fellows used to be paid in a stipend (still received) and a dividend of College profits (not usually declared these days).

    3) The invention of the printing press means that multiple copies of knowledge can be made cheaply and the knowledge is more likely to survive; the creation of patent systems (also from the original letters patent, which granted monopolies, often to Corporations) meant that secrecy was no longer the best way to exploit an invention and inventions would be recorded.

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  11. I look forward to the next post. I hope as you discuss the individual and state vis a vis the corporation, that you will discuss the way in which the corporation can protect individual wrongdoers from the consequences of their actions.

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  12. oh so this is your opinion? Well my opinion is that you couldn't be more wrong

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  13. Gonzalo Lira, the AntiKythera is fascinating. But your timeline is Eurocentric.

    During the European Dark Ages, Cordoba in al-Andalus and Baghdad under the Abassids were epicenters of culture and learning. Many ancient Greek texts survived because they were translated into Arabic ... and then from Arabic into Latin. So the Muslims were instrumental in the preservation, advancement and transmission of Greek knowledge into Europe.

    The Muslims in their pursuit of knowledge also translated Sanskrit texts into Arabic. The Italian Renaissance mathematician Fibonacci introduced the Arab numeral system to Europe. He learned it from the Moors in Spain. While the Muslim mathematicians had adopted the numeral system used in India.

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  14. Interesting view. Corporations as owners of ideas, of property is critical issue. corporations have some exclusive privileges - thanks to their immortality, and "organized nature" they can effectively gain ownership of
    (or even steal)property from individuals.

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  15. I read this article on Zero Hedge.

    It is the best written article I've read on ZH since I started 10 months ago.

    Congratulations.

    I look forward to reading the next part.

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  16. "The structural asset of a company is the mechanism that allows it to accumulate knowledge."

    It must be why the for-profit health care corporations in the United States are doing so well.

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  17. If limited liability for debts really is the outstanding feature of corporations that enables them to be so well suited to the preservation of knowledge and technologies, as you seem to be arguing, then that makes the corporation utterly superfluous to that purpose, because limited liability for debts can be simply arranged for by private contract. The corporation is a legal fiction created by and for state coercion, and as such it also inherently has some morally unjustifiable features such as limited liability for torts - basically a license to do harm with impunity - and the privilege of coercive monopoly, as already mentioned by a few other commenters.

    Also, the more institutionalized an organization, the more it tends to take on a life of its own and prey/ parasitize upon the individuals it was orginally intended to benefit. It seems to me that historically this, far from being a good thing, has actually destroyed much more useful knowledge than it has produced or preserved.

    The criterion by which the corporation selects which technology to preserve (and, very importantly, which to suppress!) is whether or not it benefits, empowers, and perpetuates the institution itself, rather than the individuals in whose name it exists. This has a huge and predominantly malignant influence on the nature of the technologies chosen for further development.

    The state and its bastard children the corporations have either actively suppressed or taken regulatory control of all technologies that might empower individuals to independently increase their own wellbeing. By co-opting academia, they have also taken control of the metaphysical and epistemological premises upon which all technological development is carried out, again steering the very nature of that which gets preserved in the direction most convenient to the institution.

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  18. Rome was sacked by the Gauls in 390 BC not 387 AD. Rome was sacked by the Visigoths in 410 AD which probably would have been a better date to use. This doesn't take away anything from your article, I just thought that I would throw that correction out there. Thank you

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  19. Re the thread of good and bad corporations: it comes to , as all good and bad does, to human nature, to the varieties of that nature. Then too, we must look past the somewhat "theoretical" view you forward that the stockholder wants what is best for his partner/mate, the corporation. That is a gloss over the vagaries of human nature and greed and shortsightedness. Corporations have been slaughtered and butchered and sold piecmeal because that brought more than the expenses of gaining that control over their destiny. It is an industry with many famous "usual suspects." The stockholder wants what the stockholder wants! Corporations are lucky when it is what they also want. I again refer you to human nature, greed etc.

    As for Globalization doing this accumulation and transmission ,,, balderdash!! No more than having a thousand men smoke of a thousand cigars in a thousand locale will turn smoke into a tobacco field. Category error, will smith, category error.

    Parasitic corps are the result of parasitic officers at the helm. And they are aided and abetted by would be great parasites who join in for the plunderous voyage... as stockholders.

    Early capitalists were moral agents responsible to Their Maker. They are a dying breed. I am coming to understand the article decades ago in Playboy warning that sociopaths would run things soon. Proof? Look around. "Greed is good," Mike Miiken "There is no place for morality in business", G. Sorros.

    A question? if I may. on new forms of structural value and of enduring group endeavours. We have now "open source" manufacturing, of which I became aware thqnks to Wired Magazine. There are still ways to profit, ways to protect intellectual property even when its revealed to the world for open use. Yet no corporation,, just a constantly renewable pool of participants. Like the non-gangs of independent criminals that are so illusive for police because they might never meet again. I wonder, then, what changes are coming as corporations grow up?

    waltinseattle, "73"

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  20. When you have a system designed so others that do nothing profit from those that work, the system is broken and will always oppress.

    When the wage is earned it is deserved, otherwise you are just feeding the parasites.

    The rich are always parasites and always detrimental to mankind's well being.

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  21. Anon @ 6:04 PM - If the rich are always parasites and detrimental to mankind's well being, explain this.

    - A rich person endowed a scholarship program that allowed me to get a college education.

    - Rich people donated money to cover the shortfall for an English as a Second Language program in my community.

    - A rich person donated money to buy the dryer needed to replace the one that died at the animal shelter where I volunteer.

    Generosity and love for our fellow man and woman are not functions of wealth, or the lack of it.

    Generosity and love for our follow man and woman are functions of the human heart. Those who act out of love for others do so no matter how much money they have.

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    Replies
    1. K Smith, you are doubtlessly in error.

      More likely it was not a rich person, but a woman who had been granted unearned wealth, taken from her husband through divorce, or taken from her son when her husband died, or taken through a frivolous lawsuit, or gained from her non-work in employment as the token female in a group of working men... some such woman as this donated the money for the philgynopic causes you mentioned above.

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  22. Hmmm ... very interesting article, and I love the use of the ancient clock gizmo to draw the reader into your story.

    Based on your history of the corporation, I would suggest that perhaps the first ever corporation was the Ark of Noah, LLC - a collaborative venture that preserved the "structural asset" value of God's creation through the destructive period of the Great Flood.

    Then we could also consider the Tower of Babel, LLC - another collaborative venture whose "structural asset" value scared even God Himself into destroying it before the ultimate goal of the corporation was actualized.

    Perhaps our current path of progress beginning with the first modern-day corporation - VOC - is a neo-Babel incarnation ... that would make for some very exciting times ahead!

    Thank you for all of your very thought-inspiring posts.

    - A Fan

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  23. Gonzalo, this is a brilliant piece! I submit that along with the corporation as the mechanism that facilitates the transfer and preservation of technology, the patent also serves that end. A patent is a legal mechanism that enables government to grant a monopoly to the entity that invents something. During the time that the patent is valid the law protects the entity's exclusive right to that invention. Thus, there is an economic incentive to invent - and there is a mechanism that enables the transference of that invented technology to someone else who will, hopefully, enhance it in order to extract the maximum return on his investment.

    When the patent expires, the invention reverts to the public domain and thus the technology becomes available to all. This is rather like the example of the British spreading guns all around the world. The gun enters the public domain and thus the technology is preserved and improved (if it is deemed to be beneficial technology).

    Como me encanta esta pagina! Keep up the great writing - I feel like reading this page is like taking my brain to a gymnasium for a refreshingly vigorous workout!

    Jason Elliott
    People's State of Oregon

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  24. The argument is interesting, but it starts from a false premise.

    The life expectancy of corporations is considerably shorter than the life expectancy of people.

    Very few corporations remain in existence for longer than thirty years. The large majority of corporations are in existence for only a few years - people incorporate, start a business, are unsuccessful and close the business, or they are successful and then decide to retire and close the business. When the business closes, the corporate charter lapses for nonpayment of fees.

    Examination of the history of successful corporations that have been in existence for more than thirty years will show that most of these corporations started from scratch - they were not created by using pieces of earlier corporations as building blocks.

    It's pretty easy to check this point. Go to the website of any secretary of state corporation division, get a list of corporations licensed to do business in the state, and check the dates of incorporation and corporate histories. You will find that the vast majority of corporations are tiny mom and pop affairs, and only a handful of currently existing corporations are more than ten years old.

    Your admirer, Katie

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  25. "In a police-state, the citizens are “free” only so long as their actions remain within the confines of the law as dictated by the state."

    This is identical to saying the rule of law is fascist, and so you show yourself to be an especially fatuous moron again. What makes it a police state is that the police or their masters are running it for their own benefit--merely order as they order, and no law.

    What is amusing here is the implicit contrast between this post and the post I quote above...the corporation only exists as long as the rule of law does, because natural law admits of no limited liability.

    A private contract cannot effectively create limited liability, because natural law says whomever is harmed by a partner in "private limited liability" venture will take it out of the hide of the first partner they can get their hands on, and that without regard to that partner's fraction of interest in the offending concern.

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  26. A thought-provoking argument, but a Eurocentric and oversimplified one, I think.

    China boasts an incredibly inventive, continuous civilization of thousands of years, during which nearly all knowledge was successfuly preserved and passed on. Joseph Needham's 'Science and Civilisation in China' has reached 27 volumes. What the Chinese didn't do is fully exploit that knowledge, for cultural reasons (among which that literary scholars ranked at the top of the social order, merchants the bottom).

    It was Reformation-Enlightenment 'values' that launched Europe on its scientific and economic leap, the corporation was but one of its innovations (the printing press another). At the center of these values was the primacy of the individual, which unleashed competitive forces the likes of which the world had never seen. Much of European scientific invention and advance was motivated by the drive for conquest, wealth and power that resulted. In other words, the corporation is more an egg than a chicken.

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  27. Thanks for continuing to share your thoughts. The articles are always an interesting and informative read.

    Because Corporations may have played a positive role in the history of the world - and I agree that they have - does not necessarily mean that they still do.

    I suggest that we're past the point where rapacious capitalism can be anything other than a drag on our continued development and possibly even survival.

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  28. During the period 1602-present:

    Europe hasn't been sacked.

    It suffered WWI and WWII, but wasn't destroyed.

    Why is it that after ancient wars, the winners completely destroyed the losers, but not so after modern wars?

    Could it be because the Rothschilds now fund both sides, and won't let one side completely destroy the other?

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  29. It was Reformation-Enlightenment 'values' that launched Europe on its scientific and economic leap, the corporation was but one of its innovations. buy facebook fans

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