25 March 2007

Moving into the Entrepreneurial Economy

The defining figure in an agricultural economy is the farmer with a hoe.
The defining figure in an industrial economy is the factory worker helping to manufacture back hoes.
The defining figure in an information economy is the engineer who works on design plans for the back hoe.

The work of the factory work can substitute for quite a few farmers. (You can see in the above graph that farm workers were about 80-some% of the working population in 1800 and about ~3% of the working population in 1980.)
The knowledge worker, too, can replace a number of factory workers. (Think about how a newly designed robot - the product of a knowledge worker - can replace numerous factory workers.)
My own vision of a movement into an entrepreneurial economy is that the portion of the work force categorized as entrepreneur will grow as did the factory worker in the 1800s and the information (or knowledge) worker in the 1900s.
Manufacturing in the 1500s involved little alteration to raw materials: wheat was ground, wool was spun, and grapes crushed and aged. Yet by the 1800s the processing was more sophisticated. Manufacturing assumes a mature market for raw goods - and the manufacturer uses raw goods as inputs to a process that creates more value than the mere trade of raw goods.
The information economy arose out of the complexity of the industrial economy. As machinery, products, processes, markets, and distribution became more complex, it created a demand for more sophisticated workers. Education that shared knowledge about principles in design, engineering, advertising, and sales became important in the creation of a skilled work force - the best jobs increasingly required university education. The information economy assumes a mature market for capital - and the knowledge workers use capital goods as the material to be manipulated into greater value just as the capitalists uses raw materials to be manipulated into greater value.
We now have a very mature information economy. This forms a great foundation for an entrepreneurial economy that could build on information technology. If entrepreneurship is about bringing together raw materials, capital, and labor (or, more specifically, knowledge workers), then it assumes information networks that make dynamic markets cost-effective. The information economy will be the foundation for the coming entrepreneurial economy.
One difference that will characterize the entrepreneurial economy is the role of the worker. Traditionally, a knowledge worker sold his / her skills to the corporation that transformed those efforts into value on the market in the form of goods or services. Entrepreneurs or managers were responsible for correctly orchestrating such efforts into projects and tasks that created market value; if they did well, these entrepreneurs and managers were handsomely rewarded. The entrepreneurial economy will change that arrangement. An increasing percentage of knowledge workers (a percentage that I suspect will not exceed 30 or 40% by 2050) will work as entrepreneurs themselves. By that I partly mean that they will offer their services through a dynamic market rather than a traditional salaried position. Their pay will be linked to profits from particular projects or activities. We'll have the corporate equivalent of self-organizing complexity rather than central, command and control economies.
This will drive further advances in information technology, just as the industrial revolution transformed agricultural and the information economy has transformed industry. And this change will simply be the start of a more complex change that will transform the modern corporation into something that looks more like an incubator than a bureaucracy.
This will change so many things about how we conceive of corporations today. This and related, required changes will disperse power outwards from paternalistic managers towards individual workers. It will create opportunities that don't exist today. And it will link to the driving force of progress throughout the history of Western Civilization - increased autonomy for the individual.

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