Saturday 21st April 2018

Resource Clips


The bosses and the masses

An historian looks at control, co-operation and chaos in our networked age

by Greg Klein

Niall Ferguson likely appreciates the irony of Mark Zuckerberg’s appearance before U.S. Congress. Although some observers describe his social network as the ultimate democratic movement, the fantastically wealthy Facebook co-founder actually controls an enormously powerful top-down organization. Ferguson examines the way networks and hierarchies play out in history with his latest book, The Square and the Tower: Networks and Power, from the Freemasons to Facebook. That leads him to a rather surprising call for a new world order of government oversight which, to egalitarians, might sound heretically hierarchical.

An historian looks at control, co-operation and chaos in our networked age

Hierarchies—they’re the stuff of dictators, plutocrats, big bosses and tightly knit groups. Most effective when directing resources to institutions with a single goal, Ferguson explains, they can suit such endeavours as the military, factories or bureaucracies. Networks, on the other hand, feature looser, more wide-ranging relationships between individual members and with other networks. They prove themselves better at adaptation, improvisation and innovation. Of course a hierarchy can be seen as a type of network with much fewer “nodes,” while networks can to some extent contain hierarchies.

The triumph of networks can be seen in today’s commodity markets, financial markets, technical innovation, trade and communication. The interconnectedness of almost everything can hardly be illustrated without resorting to a flow chart resembling a plate of spaghetti. Ferguson considers our time to be the second era, following the advent of the printing press, in which “superannuated hierarchical institutions have been challenged by novel networks, their impact magnified by new technology.”

But looking at Facebook’s share structure, he argues that this particular global network “is itself owned by an exclusive network of Silicon Valley insiders.”

It’s not just Zuckerberg’s empire. With figures from last year’s time of writing, Ferguson reports, “Six of the eight richest men in the world are Bill Gates (with personal wealth estimated at $76bn), Carlos Slim ($50bn), Jeff Bezos ($45bn), Mark Zuckerberg ($45bn), Larry Ellison ($44bn) and Michael Bloomberg ($40bn). Their fortunes have been built on, respectively, software, telecoms, online retail, social networking, enterprise software and business data. The reason they have become so wealthy is not that they are the world’s entrepreneurial ‘superstars’, but that each has established something close to a monopoly.”

The mid-20th century constituted the “zenith of hierarchy,” Ferguson states, most notoriously exemplified by Hitler, Stalin and Mao Tse-tung. They found communication networks beneficial, for example in the way Stalin turned the telephone into an eavesdropping device.

An historian looks at control, co-operation and chaos in our networked age

That was a situation roughly analogous to the current Facebook controversy. Furthermore Zuckerberg, like his counterparts at Google, has shown willingness to censor ideas unacceptable to the status quo.

Of course a sense of proportion’s necessary. Ferguson says of Stalin: “No Oriental despot had wielded such complete personal power over an empire, because no previous hierarchy had been able to make participation in unofficial networks – even suspected participation – so terrifyingly dangerous.”

Apart from totalitarian control of mass communications, there lurks danger in mass participation. There’s no end to the chaotic damage potentially inflicted by vandals and criminals through the Internet. “And it is no longer a mere possibility that this network can be instrumentalized by corrupt oligarchs or religious fanatics to wage a new and unpredictable kind of war in cyberspace. That war has commenced. Indices of geopolitical risk suggest that conventional and even nuclear war may not be far behind…. The lesson of history is that trusting in networks to run the world is a recipe for anarchy.”

Ferguson also looks at financial markets, outlining the rise of the Rothschilds and George Soros, as well as the fall of Lehman Brothers, where the failure of one network node nearly caused a depression of 1930s magnitude. Ferguson quotes Bank of England chief economist Andrew Haldane’s explanation: “No one had quite noticed that the global financial network had become connected enough for distress to cascade rapidly from one institution to many, but sparse enough for many institutions to be poorly diversified and inadequately insured against the failure of a counterparty.”

Ferguson brings together lots of interesting info on disparate topics. Even so, his efforts to apply network theory can often elicit a “so what?” response. Readers might ask whether the author of 15 books including The Ascent of Money has found a new paradigm of historical inquiry or just another way of packaging research for the market.

Still, his overriding concern sounds compelling: “The key question is how far this network of economic complexity now poses a threat to the hierarchical world order of nation-states.” Asking whether such a networked world can retain order, he replies, “Some say that it can. In the light of historical experience, I very much doubt it.”


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