Read more on Medium here …
Read more on Medium here …
Networks are the new, successful structure of organizations, be it in trade and commerce (Amazon, Alibaba, Uber, Airbnb, …) or in organizing work. Employed work is being increasingly replaced by freelance: platforms offer virtually everything from secretarial to project management. The concept of employment is dying while it still serves as the main basis of a social contract that is the result of an epoch of negotiations shaping something like a symbiotic connection of mutual dependencies between employers and employees. The further development of society suggests that this is no longer viable. The current social contract is basically dissolving before our eyes: the relation of the players involved in economic life needs to be redefined to reflect the changes that are currently materializing in society.
During the transition from the Industrial Society to Network Society, light-weight network structures are replacing the slower, heavily process-laden silo structures of the Industrial Age. Networks in this sense orchestrate assets instead of owning them. By rigidly adhering to old structures or trying to preserve them by tightening up regulation, we could miss the opportunity to design a new framework that is going to be inevitable some time soon anyway. Employment is being continuously replaced by freelance and short-term contracts. In the US more than 40 percent of workers held so-called “insecure contingent jobs” in 2015 . The tendency of this is strongly increasing.
The transition to a new epoch hasn’t only manifested itself in a radical transformation of society and organizational structures as well as the disruption of business models. We also see phenomena resurface that were typical around the advent of the last epoch when craftsmen and farmers were driven out of their work and had to queue for underpaid labour in the new factories that disrupted basically all types of business. Those recurring patterns are
i.e. a loss of trust between citizens and the elites;
3. increased insecurity in personal life planning – considerably more than during other times.
Previously as well as currently the reason for an emerging imbalance between societal groups lies in the ability to use or own the new culture techniques. This enables the (new) elites to gain a substantial economic advantage or power over those who do not own or cannot yet use the technologies of the new age. The other reason for a tilt of economic scales in society lies in the fact that the social contract of the ending epoch doesn’t work with the social and economic structure of the new age.
It seems that a new epoch demands a new social contract. The current social contract in its broader sense dates back to the 18th century when, among others, Jean-Jacques Rousseau published a draft in 1762. This foundation has seen negotiations and an evolution of adaptations across the entire Industrial Age, but the necessary amendment for the Network Society hasn’t surfaced so far. Some of the following may be useful to discuss in this context.
Part 1: From representative to participative democracy
As a cornerstone, every social contract lays out the form of government that respectively determines with whom the will shall be vested in a society. With the current provision of democracy increasing difficulty has surfaced recently.
Currently, the appreciation for democracy is in a free fall: The World Values Surveys  show a scary decrease in the appreciation for living in a democratically governed country. In the US the appreciation for democracy falls from approx. 75 percent by those with the birth years in the 1930s to just over 30 percent with those born in the 1980s. Besides, democracy can be abused by authoritarian leaders and be degraded to a sheer legitimation tool while citizens are deprived of real participation. The recent tendency that authoritarian leaders and groups see massive gains in the electorate in a series of western democracies is nothing short of an alarming development. Donald Trump, Marine Le Pen, Nigel Farage and the Leave campaigners in Great Britain or the AfD in Germany exemplify this trend with their sharp rise in success in stark contrast to the average share that such groups in society typically occupy.
What can such a necessary advancement of democracy look like? The social contract of 1762 placed a strong emphasis on the rights and duties of the individual. From today’s viewpoint, a new version would need to add duties and responsibilities for the community and for the collective. In short, participation would need to be established as a right and a duty. The proposal: Advance democracy from the current representative democracy to a participative democracy.
How could this be organized? Participation can neither come as a sheer plebiscite inflation nor as pure online voting. Referenda as such are extremely open to abuse when misused as a legitimation tool where badly informed citizens vote on issues that have been populistically manipulated. Pure online participation without offering a follow-up live discussion (in whatever format) basically conveys the underlying message that “We actually don’t want to talk to you anyway.” Participation is also not to be imagined as 7,000 people gathering in a conference hall and speaking simultaneously.
Participation that works comes in two useful forms: The one is personal engagement in civil society projects like in disaster relief and in all kinds of social services. On the other hand, participation may materialize in contributing to public projects, where persons who are interested or competent in a topic will join the discussion and development of public policy and programs. One example could be the Digital Agenda of the City of Vienna, where citizens co-created the digital strategy of the municipality and collaborated even in follow-up projects.
This type of co-creation leads to better endorsement and legitimation of programs that have been developed together. Besides, the complexity of today’s society and factors of influence can be considered and integrated much better by the wisdom of the many than by any small team.
The new paradigm would need to be rooted in a personal obligation and readiness to take responsibility for ourselves as well as for others and the community as a whole. In a participative democracy it’s less about being important but more about making a contribution.
Part 2: Commitment to balanced economic policies
Small incomes and securing the subsistence of people earning them will be one major touchstone and key challenge of a freelance Network Society. Countries in which medium and lower incomes slide into poverty or considerably lowered life standards see a massive erosion of voters turning to radical or populist leaders or parties. Two examples: In 2015, the real wages in Great Britain were 7 percent below the level of 2007 (while they were 5 percent above 2007 values in Canada). The real wages of the lowest 10th percentile of incomes in the US today are below the values of the year 1979 (!) – the medium real wages are more or less unchanged since 1979 (!) – only the highest 10 percent of incomes saw a decent increase. Trump and the Brexit vote seem explained (the same applies to a series of other countries). A further delay of tax relief for small incomes avenges itself on the parties of the political center. Fortunately, some countries have quite recently improved on their corresponding policies.
The social contract in the narrower sense governs – among other things – the responsibilities of employers and employees and will have to address the aforementioned, specifically with regard to small incomes. Social achievements of successful democracies like health insurance and retirement funds as well as continuing professional education will solely burden the freelancers in a network economy without a revision of the current social contract. In addition, freelancers will have to administer themselves and usually need to pay for their own assets with which they do their work: the car of the Uber driver is paid/repaired/insured by the driver himself. Failure to achieve a suitable solution regarding payment and social security will inevitably build up a social time bomb simply by the enormous size of the affected cohort alone. Portable benefits, a share in social insurance as well as new regulations of minimum wages are being considered, but seem to fight a fruitless battle against the fact that companies aren’t bound to contracting services locally (besides services that can only be rendered on site). Nothing can stand in the way of choosing a web designer in Bangladesh via one of the numerous freelancer platforms. Possibly, the deliverables will be similar, but the fee may cost a tenth of what a US or European professional may need to charge to support himself. The competition in the labour market doesn’t need to immigrate anymore. At the same time, the western corporate world cannibalizes the buying power of its own client base: precarious pay and a middle class slowly sliding toward lower living standards, instability and even poverty certainly do not make a decent and solvent consumer base. Demand and growth vanish. The way to a solution needs to consider the negotiation power of the parties involved: The negotiation power of the platform enterprises is evident, while the workers are currently on their own without much weight in the negotiation scale besides their skills. In a labour market that continues to be highly competitive, this may not suffice to wrest decent conditions, especially because workers do not sign individual contracts anymore but sit with standard terms of service on a platform instead. A new way to organize labour will be needed: On the one hand, the negotiation power of workers needs to be re-established and, on the other hand, the uneconomic self-administration issue needs a workable solution. This is where platform cooperatives come in as one possible solution: workers can hold a membership or share and receive services like the administration of their taxes, accounting etc. (that can be delivered much more easily and cost efficiently than if each freelancer did it individually) – while the platform offers the products and services of its members. Such initiatives may be organized as a cooperative or as a not-for-profit organization, with varying membership fees or commissions depending on the numbers of services each member wishes to use. Such cooperative or non-profit platforms would need to reside on community values regarding payment and social standards. Such quality platforms could create a counterweight, as a Cooperative Economy, to the common wage and social dumping in the so-called Sharing Economy – and establish negotiation power and increased efficiency through joint administration. Conclusion: The balance of power stabilizes systems.
Public finance will need rethinking as well: Both in a project at Harvard University and in a much acknowledged paper by IMF economists, underfinanced or badly credit funded systems tend to show higher volatility, instability and overall low growth. Among other things, the authors of the IMF paper point to the austerity regime of their own institution as a cause for the era of low growth that we are obviously in. Mariana Mazzucato explained in a recent Bloomberg interview that if countries manage to achieve a higher growth in GDP with debt financed investment than what the debt service will cost them, they will be better able to rehabilitate their state finances. Underfinanced systems won’t manage to do the same: they remain instable and show too little medium and long-term growth. In September 2016 the OECD issued a similar recommendation. Conclusion: No return without investment.
Tax policies need to be similarly reconsidered for the Network Society. Currently, many countries tax capital gains on a rather low level while labour often sees a two or three times higher tax rate. This leads to efficiency innovation in companies with the effect of a release of labour and capital, the latter flowing into financial markets. In the US this effect materializes e.g. in the infamous share buy-back programs. No wonder: Due to the massive imbalance in the taxation of capital gains on the one hand and labour on the other, investment in labour doesn’t pay off well enough. Market generating innovation, as explained by Clayton Christensen, that creates long-term return and invests in labour as well remains, at large, outside of current investment considerations. Harmonization of the taxation between work and added value or capital gains seems advisable. Conclusion: We shape decisions by shaping taxation.
Part 3: Reduction of rules and regulations
The Sharing Economy demonstrates that a lot less regulation would do. This realization is rather trivial. Every system needs a certain set of rules in order to work well. The point of stable balance between increased efficiency and preventing misuse or damage on the one hand and an uneconomical burden on the other isn’t that trivial a question anymore. Nevertheless, this point of balance should be sought.
Part 4: Education in new culture techniques
The invention of the printing press stands at the beginning of the last era as a symbol: Everyone could suddenly own a book. Great! It was also an advantage to be able to read in order to benefit from the blessings of this innovation. We see the same today. The internet connection would be the same as having a book, however, being able to use it wouldn’t mean operating a Facebook account without major problems for a year. Programming and web technologies as well as information and media literacy are today’s culture techniques that need to become as natural as reading and writing in order to close the digital divide.
Educating children and youth is not going to suffice though: Adults have to be included in these strategies quickly. According to the European Commission, the EU alone lacks well over 400,000 IT professionals in jobs that cannot be filled currently (IT is just one example of the new sought-after professions). At the same time, the economy lays off hundreds of thousands of workers who lack the currently needed competencies. At the end of an epoch and the beginning of a new one, series of professions disappear and lots of new ones emerge – considerably more than during the times in between. The list of historic professions on Wikipedia is certainly worth a look. We are no longer lifting heavy stuff by hand – we are using cranes today instead. Mankind continuously rids himself of drudgery.
Another new culture technique that will be needed while we venture into an emerging Entrepreneurial Age: business and economics education needs to become a common standard for everyone. There are numbers of promising activities in this field, but a standard integration in curricula still awaits implementation. Experimental programs like school children founding a company and running it across the entire school year serve as lighthouse examples for what will be needed.
A further competence in the Network Age and in times of participative democracy will be a sense of community and helpfulness … something that we consequently train ‘down’ in our children: In experiments, toddlers demonstrate that they help each other manage a set of given tasks. At age seven children in the same experiment watch each other fail. This isn’t natural behaviour but a consistently trained one. During the Industrial Age “Competition is good for business” was the agreed road to success. In the Network Age, we may need to shift to the more successful precept “Cooperation is good for business” as we enter the age of collaborative culture, where cooperation outperforms the principle of the lone warrior every time. Should we not manage to develop and cultivate a sense of community and helpfulness in society, we may see the highly complex Network Society characterized by the escalation of self-serving, particular interests and confrontation with a strongly damaging effect on growth and prosperity.
Could mankind agree to managing the current turning point in history more smartly than the last one (reference: the French Revolution)? To accomplish this, we do not need additional rules according to Peter Drucker, but as he puts it: “No country suffers from a shortage of laws. We need a new model.”
 Pofelt, Elaine; Shocker: 40% of Workers Now Have ‘Contingent’ Jobs, Says U.S. Government. Forbes, 25 May 2015. [Online]: http://www.forbes.com/sites/elainepofeldt/2015/05/25/shocker-40-of-workers-now-have-contingent-jobs-says-u-s-government/
 World Values Surveys, Waves 5 and 6 (2005 – 14). Consolidated data from EU member states. Valid answers: USA 3.398; EU 25.789. and:
Foa, Roberto S.; Mounk, Yasha: The Danger of Deconsolidation – The Democratic Disconnect. Journal of Democracy, Vol. 27, No. 3, July 2014.
 Mader, Isabella: Hatred On The Web, Brexit: How The Reptile Brain Blows Democracy. [Online]: http://www.excellence-institute.at/en/hatred-on-the-web-brexit-how-the-reptile-brain-blows-democracy/
 Ip, Greg: Fiscal Policy Makes A Quiet Turn Toward Stimulus. Wall Street Journal, 14 September 2016. [Online]: http://www.wsj.com/articles/fiscal-policy-makes-a-quiet-turn-toward-stimulus-1473870699
 Aghion, Philippe et al.: Volatility and growth: Credit constraints and productivity-enhancing investment. Working paper, Department of Economics, Harvard University, 2005. [Online auf Harvard DASH]: https://dash.harvard.edu/handle/1/27769097
 Ostry, Jonathan ; Loungani , Prakash, Furceri, Davide: Neoliberalism: Oversold? IMF Finance & Development, Vol. 53, Nr. 2, June 2016. [Online]: http://www.imf.org/external/pubs/ft/fandd/2016/06/pdf/ostry.pdf
Sharing Economy, self-organizing networks, democratization of information, ‘sharing is the new owning’, cheap and quick money through Crowdfunding, more innovation through Crowdsourcing … all this is current. Cut.
In fact we find ourselves in the midst of a transition from one era to another: from modern society to network society. The tribal society started with the development of language. When writing was invented tribal society developed into ancient society. Modern (or industrialized) society developed with Gutenberg’s printing press. The change to the era of networking began with the invention and global spread of the internet. With each transition, communication behaviour, complexity and hierarchies changed considerably. All the changes of eras were in fact driven by a major change in the availability of information and knowledge.
Usually such transitions take decades to complete. An era change always involves a shift of powers and a split in society divided by the new cultural (social and economic) techniques.
At the turn of eras to modern/industrial society the printing press was invented. Suddenly, everyone could own a book. Grand! Yet it was at this time also quite an advantage to be able to read in order to benefit from the blessings of this innovation. Eventually (at a much later date), compulsory school education was introduced.
At the turn of eras, at which we stand now, the new and society-changing cultural technique is the internet along with its accompanying technologies. Illusively the internet appears as if everyone could take part on an equal basis. This is somewhat deceptive as media literacy does not mean only that one is able to operate a facebook profile without difficulty for a year. Conditions could actually not be more unfair. The small bookseller against Amazon? A million users win against facebook? Oh sure. Where? When did we see this really happen?
While disruption will be necessary in order for mankind to move on there are several questions that we need to ask ourselves in this transition phase between the Industria Age and Network Society. Outdated, outdated practices may be on the verge of entering through the back door under a new name. Let’s watch out that we don’t fall back into feudal practices that may in fact backfire on the attempt to creating increasing prosperity.
The Sharing Economy: A Trojan?
The basic values of the network society are solidarity and sharing. The Sharing Economy serves a virtually social (democratic) ideal. Basically it is okay of course, that if one buys the cars which others use, then everyone contributes a fair share so the company can make a profit. But what used to be neighbourly help is now called Airbnb and is a business that confronts hotels, which sit with numerous and costly legal and technical obligations for facilities, fire protection, etc., while Airbnb hosts in most cases have no or slim regulations to adhere to. Hence the issue is creating unfair market conditions, while both are basically doing the same thing.
Does the word Crowdfunding still sound so romantic when the cost of financing that way ranges from 9 to 15 per cent? Crowdfunding at this horrendous cost is typically used by startup businesses, while large corporations acquire millions of credit funding for close to nothing. The Sharing Economy is good business for auditing and law firms. The high cost of financing hits precisely the startup businesses, which we hope will bring positive impulses to the economy. This, while the burden is distributed to their great disadvantage. The hope for positive and sustainable economic impulses from startups cannot be fulfilled well under such circumstances.
Regarding so called CrowdSOURCING, i.e. the drawing of innovative ideas from the public, there is just one provocative question to be asked: ‘Is this new wage dumping?’ Provocatively: ‘Just fire the people in R&D – the guys out there do it for free – or one of maybe 500 wins a subscription for something or other.’
Freedom of Information / Open Data
Concerning the “Freedom of Information” movement, currently propagandized as the democratization of information, we might ask who really benefits greatly from published Open Government Data. Software and databases, which are unaffordable for individuals or SMEs, enable large corporations in the information business to track back to individual persons even from carefully anonymized data. There can be no question of democratization of information (and privacy) under such circumstances. The freedom of information act largely plays into the hands of data collecting information concerns and puts governments at risk of accidentally disclosing private details of individuals or business information of companies to their competitors.
To summarize, it looks very romantic yet isn’t. Care and a set of standards still needs to be applied in this field in order to arrive at a mature and responsible understanding of the issue.
Instability and Loss of Trust
Almost everything changes in society at the time of a change in era: work, business models, values. Typically, at the beginning of a new era a series of professions disappear or greatly shrink in relevance – significantly more than during “normal” times. Transition times between eras also typically see the emergence of more new professions than ‘normal’ times. At first, a feeling of discomfort or fear spreads in society, because the reasons for the development are not visible. So we panic – at least since the mid 1960s when an illustration of a robot representing the “Job Killer Automation” was emblazoned on the covers of mainstream media. The visible effects of such unbalanced reporting are a feeling of instability and loss of trust in management or politicians, who seem to be responsible for keeping the economy and society in a functioning and stable mode. While some jobs erode others are desperately needed: Europe reports missing 400.000 IT professionals by the end of 2014.
In transition times between eras the successful concepts that have been used so far do not produce satisfying results anymore: conditions have changed, thus concepts will have to be amended. If we haven’t communicated that change is happening and what this means, trust will erode. How to get through transition without clashes of societal groups? What would concepts compatible with network society look like?
Until now the economy was ruled by the principle: ‘Competition is good for business.’ Network society now functions with the opposing principle: ‘Together is good for business.’ Numerous studies, in particular those by Alexander Pentland (M.I.T.) with the currently most substantial and valid data, have shown that the professions, companies and towns or regions, which are considerably more successful economically are those in which more communication and interdisciplinary knowledge sharing take place. This was found true for call centre agents as well as for stockbrokers and entire cities. The more interaction, mixing and mingling, and intercultural and interdisciplinary exchange there is, the more innovation, added value and prosperity. Cooperation is therefore the imperative of network society. Bad news for the ‘seal-the-border’ and proprietory systems fraction.
Our current culture is deeply engrained with the conviction that ‘those up there do what they like anyway.’ Participation today still means for many to go to a gathering, to deliver a rant and to throw a paper with accusations onto the table and then to leave. At best, leaving happens without slamming the door off the hinges. An approach like this won’t enable us to make a difference though. Participation culture still isn’t a tradition. This is something society has to learn. Participation with fruitful results will not come about in response to a mailshot, but rather as described below:
Power is increasingly less often being won in elections or by being placed in a high level position in management. Legitimation is generated through participation – not only in allowing population or staff to participate in processes and problem solving but also by management or politics participating in the life of people – and addressing problems together. Why? Two reasons. Firstly, people will endorse and support what has been developed together with them, and secondly, the solutions of a larger number of people will be smarter than a solution thought out by one person alone. In today’s complex world more brains and eyes will see more eventualities and issues than one person alone. Management or government thus have to promise less and should instead offer more (mutual) participation. In this way, insecurity can be reduced, planning stability and trust can be generated – and change does not have to be imposed but can be designed together. To wrap up: we will have to conduct conversations. The projects in the public or corporate world that really generate engagement and collaboration are not the ones where we set up a database and inform participants by mailshot. It is those, in which we talk to each other with mutual interest.