Not too far into the future, we are going to get into a golden era of economics where everyone gets a fair share of the pie. The Economic Utopia. Yes, It is cliched, but I am an optimist, and for the lack of another word, I dare to call it Utopia. I wish I could write with such exuberance about the political structures of the future, but for now I will still stick to economics and hope that politics shall follow economics with a lag of couple of decades.
The history of economic structures has been all about just two dynamics – The creation of value and the subsequent distribution of profits. Different systems use different weights, both for the propagation of value and for the propagation of profits. Before I dive into the future, let’s understand the past through this perspective.
Creation of Value
Barely four centuries ago, very few people even knew the meaning of a company/corporation in it’s modern form. The English East India Company and the Dutch East India Company were formed in 1600 and 1612 respectively. There are examples of companies that date all the way back to 7th Century (Kongo Gumi, Japan), but most companies that existed before the 16th century were essentially family businesses where it was clear who was in-charge. The family died, the company in most cases died. More importantly, the company went bankrupt, the family went bankrupt too. The key innovation that came about in the 16th-17th century was the concept of a virtual entity. The company had a life of it’s own, independent from it’s founders. Which is why in some places it is called a corporation, or an incorporated (literally meaning “formed into a living body” in Latin). Successful companies are essentially value creators. They take raw materials and man power and deliver something that makes the world a better place (not talking about tobacco companies here). Others pay for that value so that the company thrives.
But this was not how it was always. Once upon a time, empires, kingdoms and fiefs ruled the lands. Such entities added value too. For example, they provided basic security, built trade channels and managed food supplies. But the payments received for the value were not necessarily with consent.
Time for some definitions –
VEEs – Value exchange entities. Entities which earn all of their income in commensurate to the value they add. The operative word is all. Individuals drawing fixed salaries from large corporate are obviously not VEEs.
There are two general trends through the history –
- The creation and sustenance of such VEEs has been simplifying. In the modern era, it has come down to individuals (we refer to them as freelancers).
- The size of the largest sustainable VEE has been increasing. We are so close to having a trillion dollar valuation company.
But no matter what the size of the VEE is, historically, it has always been challenging to estimate the value added by the VEE. This is where crypto comes in. Public verifiable ledger is the key to measuring contributions and distributing wealth while being fair and transparent.
VEEs could be –
- A person
- A group of AIs (sort of like a group of people forming a company)
- A company like it is in the current context
- A country
- or even the whole world.
- If Musk has is way, Mars as one VEE and Earth as another?
PS: I wrote this nearly two years ago. But fast-forward to 2021 : Covid seems to have already accelerated this process. With remote working being the norm, why should any boundaries matter any more. It is this loosely bound system of machines and humans which are the building blocks of the VEEs that I talk about in the article.