The Rise of the Network Society

The information technology revolution is different from the preceding technological revolutions in that it brought about the network in which information in itself creates information through the continuous feedback loop, whereas all other technological revolutions were physical. In other words, all preceding revolutions provided extension of the human body, while IT revolution is creating extension of the human brain.

Manuel Castells, a philosopher, authored a thick book “The Rise of the Network Society” (a first volume of three books), in 1996, to describe the typical phenomena in “Information Age”. Although Castells wrote this book more than 15 years ago and some parts seem to be outdated or too familiar to us, we can still learn from the way he sees the network society.

Network society

Let’s see the definition of network first. According to him, a network is a set of interconnected nodes. A node is the point a t which a curve intersects it self.

The network owes much to the IT revolution and plays central role in the Information Age. The network society came after the information technology advancement. Internet is the main stage of this society, in which people interact each other with unprecedented frequency, creating the vast amount of communication. The idea of network society is quite common to the people living now, as we usually use facebook, twitter, etc for our daily communication.

As we always see, the dominant functions and processes in the Information Age are increasingly organized around networks. In capitalism society, capital flows into where the value is created. That means, the capital is invested globally from and to these networks.

Its impact

The author argued that the information technology and the rise of network society will bring about the globalization and change in culture, lifestyles and enterprises.

Globalization is exactly what we see now its somewhat brutal process. Culture is made up of communication process, and if we change the process, it is natural that culture changes as well. Many are very keen on joblessness especially among the youth, and some blame technological advancement as the culprit (actually, same thing happened in the preceding technological revolutions, but in the long run there will be more job creations to adopt to the change. The point is how to overcome the turbulence during the transition).

Features of information technology paradigm

Why network society matters much to us and why it emerged now? It’s because of the information technology paradigm. Castells argues that there are five key features that constitute the heart of the information technology paradigm (from page 70) :

1. Information as its raw material. Technologies act on information, not just information to act on technology. “What characterizes the current technological revolution is not the centrality of knowledge and information, but the application of such knowledge and information to knowledge generation and information processing/communication devices, in a cumulative feedback loop between innovation and the uses of innovation.”

2. Pervasiveness of effects. The new technological medium shapes all processes of our individual and collective existence, because information is the integral part of human activity.

3. Networking logic. When networks diffuse, their growth becomes exponential, as the benefits of being in the network grow exponentially, because of the greater number of connections, and the cost grows in a liner pattern. According to Robert Metcalfe (1973), the value of a network (V) increases as the square of the number of nodes (n) in the net: V = n^(n-1).

4. Flexibility. As the network is not hierarchically structured, not only processes are reversible, but also organizations and institutions can be modified, and even fundamentally altered, by rearranging their components without destroying the entire structure. What is distinctive to the configuration of the new technological paradigm is its ability to reconfigure, a decisive feature in a society characterized by constant change and organizational fluidity.

5. Convergence of specific technologies into a highly integrated system. One element in the technological system cannot exist without the other, and the borders among specific devices are diminishing. Micro-electronics, telecommunications, opto-electronics, and computers are all now integrated into information systems. Some business distinction between chip makers and software writers will exist for sometime, but not for long.

Remarks

The five features of information paradigm are still useful to explain what is going on now and predict what will come next. Especially, the idea of convergence of specific technologies is informative to me, making me think of the world in which borders are diminishing. The border is fading out in every field, not limited to the specific information devices.

Reference

Manuel Castells, “The Rise of the Network Society: The Information Age: Economy, Society, and Culture Volume I (Information Age Series)” 2nd Edition with a New Preface, Wiley-Blackwell, 2009/8/25

Self representation

Even though you are a businessperson working for somebody, that alone would not mean that you cannot build the trust with the other people. However, if your're depending heavily on your company, you'll never be able to. 

The reason is clear: if you're heavily depending on your company, you cannot represent yourself. You should be yourself to build the trust with other people. Remember that you cannot fool the others - they know you more than you do.

Capitalism, Socialism and Democracy

Now the majority of the world’s countries either have a market economy or are trying to construct one. However, people could hardly imagine it in 1940s when Marxism was everywhere. In 1940s, 40% of the world population lived under socialism rule. Not to mention USSR, even in US, there was the Marxism fever. That was the state of the world when Joseph A. Schumpeter wrote his book “Capitalism, Socialism and Democracy”.

Having spent 50 pages for evaluating Marxism (because part of his intention of writing this book was to let Marxists read it), in the part “Can Capitalism Survive?”, Schumpeter said that it cannot. That, however, did not mean that the world would undergo the changes that Marx described. Schumpeter specified strength and the essence of Capitalism, then specified the change agents of the society, and then foresaw how the world would evolve eventually. 

Strength of Capitalism

Schumpeter pointed out the strength of market-based system, saying that it is the most effective way to allocate wealth and talent. He argued that Capitalism’s wealth allocation system is different from any preceding systems in that the commercial and industrial bourgeoisie rose solely by their business success. He argued that the competition and wealth allocation in capitalism societies are fair compared with the other societies and that the fortune entrepreneurs may get would be the driving force to bring about social progress.

“That social arrangement is, or at all events was, singularly effective. In part it appeals to, and in part It creates, a schema of motives that is unsurpassed in simplicity and force. The promises of wealth and the threats of destitution that it holds out, it redeems with ruthless promptitude.　…. They are not proffered at random; yet there is a sufficiently enticing admixture of chance: the game is not like roulete, it is more like poker. They are addressed to ability, energy and supernormal capacity for work; but if there were a way of measuring either that ability in general or the personal achievement that goes into any particular success, the premiums actually paid out would probably not be found proportional to either. Spectacular prizes much greater than would have been necessary to call for the the particular effort are thrown to a small minority of winners, thus propelling much more efficaciously than a more equal and more ‘just’ distribution would, the activity of that large majority of businessmen who receive in return very modest compensation or nothing or less than nothing, and yet do their utmost because they have the big prizes before their eyes and overrate their chances of doing equally well. Similarly, the threats are addressed to imcompetance. But though the incompetent men and the obsolete methods are in fact eliminated, sometimes very promptly, sometimes with a lag, failure also threatens or actually overtakes many an able man, thus whipping up everyone, again much more efficaciously than a more equal and more ‘just’ system of penalties would. Finally, both business success and business failure are ideally precise. Neither can be talked away. ” (page 73)

I don’t think his statement is totally fair, since the talent and competence of children are hugely depending upon where they’re born, and the fact that even able men/women are facing some risk would not justify the inequality at the original state. That said, I should say that that point cannot be the fundamental criticism toward his argument.

Essence of Capitalism

Schumpeter pointed out that the rate of increase in output did not decrease from the nineties, although there had been huge concentrations of mass-production. If Marx were right, there should be the rising gap between the social system and the productivity, the change force to topple down Capitalism.

Then what is the essence of Capitalism? Schumpeter introduced the popular concept of “Creative Destruction”, saying that it is the essence and driving force of Capitalism.

“The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation – if I may use that biological term – that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in. “ (page 83)

He treated Capitalism as the organic and evolutionally process, rather than the stationary one. This view implies that we need time to evaluate the true elements of change agents of the society and that we need take synthetic approaches to analyze social systems. 

“First, since we are dealing with a process whose every element takes considerable time in revealing its true features and ultimate effects, there is no point in appraising the performance of that process ex visu of a given point of time; we must judge its performance over time, as it unfolds through decades or centuries. … Second, since we are dealing with an organic process, analysis of what happens in any particular part of it – say, in an individual concern or industry – may indeed clarify details of mechanism but is inconclusive beyond that.” (page 83)

Ironically, the methodology and perspective he used seem to be quite similar to Marx and Hegel – the dialectic way of thinking.

Intellectuals as the change agents

Schumpeter thought that intellectuals have been the change agents of all the societies, and in Capitalism society they would take the enormous role to decompose the system.

According to him, intellectuals are people who wield the power of the spoken and the written word, and one of the touches that distinguish them from other people who do the same is the absence of direct responsibility for practical affairs. Historically, intellectuals such as scientists and philosophers have taken role to stimulate, energize, verbalize and organize people and their thought. One particular aspect of their role is to illustrate principle of social change (page 153). (In fact, Marx also said that “through the history, no ignorance had changed the world”)

Schumpeter thought that there would be more intellectuals in 20th century, thanks to technology advancement (e.g. the cheaper book and newspapers), expansion of the educational apparatus and particularly of the facilities for higher education, and the rationalist nature of capitalist civilization, which gives more opportunities to intellectuals.

All these factors would contribute to the increase of intellectuals and thus white collar workers. However, the society at that time would not be able to provide enough jobs for those white workers due to its mass-manufacturing based economy. Thus the situation creates unsatisfactory conditions of employment and eventually leads to the change of the society (page 152). Schumpeter said: “In that sense, Marx’s vision was right. We can also agree with him in linking the particular social transformation that goes on under our eyes with an economic process as its prime mover. What our analysis, if correct, disproves is after all of secondary importance, however essential the role may be which it plays in the socialist credo.” He called the next society “Socialism” and argued that the society should be compatible with democracy.

Now we live in the world that Schumpeter predicted. There had been no significant revolution to topple down Capitalism, and instead, Socialism countries were decomposed and now are aiming to construct market-based economy. Mass manufacturing-based economy is almost vanished in developed countries, moving most of its base to the emerging countries. Industries in advanced economies are now more knowledge intensive, where intellectuals create far more values than the precedent period.

Remarks

I’m very curious about why the great intelligence can predict the future, although we all face the limitation of time that flesh is heir to. It is easy to describe the current situation, but it’s far more difficult to see the future through the ongoing reality. Some smart people can forecast what will happen in 10 years, but only those with great intelligence can foresee the big change in the coming 100 years. I guess if Marx were living in early 20th century, he might have written the same kind of book as that of Schumpeter.

The implication to me is as follows: facts change as time goes on, but methodologies don’t. The great thinkers had their own methodologies to see the world, by which they not only just describe the situation but also find out essence, implications and the state of the future within it. Most of the books I introduced in this blog were full of those great methodologies. That is why I read classics and am trying to learn what they thought, instead of just what they said (that can be done by Wikipedia).

Reference

Joseph A. Schumpeter, “Capitalism, Socialism and Democracy” (Third Edition, published in 1950), Harper Perennial Modern Classics (2008/11/4)

Interview with a banking Yokai

I had an opportunity to have a long interview (3 hours) with an ex-CEO of the largest investment banks in Europe. I believe that I’m good at evaluating someone, but this time it was very difficult – I couldn’t fathom what he thinks at the very depth of his mind. That said, his remark was full of implication and worth sharing:

About the essence of finance

It’s not the paradise any more. If you have money, you have to have some system to deal with it. It's all about the system to gather money from where money in in excess and allocate it to in demand. Very simple.

About risk

His biggest business principle was to evaluate risk, especially downside risk. Understand how much we can lose at the worst case, and then if the opportunity is still good enough given the risk, go for it. The biggest risk we will face in the coming 5 years is recession and deflation in Europe and US.

  We should aware that when everyone is shouting about risk, the risk is very small; instead, when no one is talking about risk, it’s largest. Thus, be very careful when people are like a herd of sheeps. Be cautious when everyone in your company says the same thing.

About decision making

The biggest role of CEO is to make decisions. In decision-making, timing is more important than accuracy. People tend to overlook the importance of choosing the right timing.

  The best way to be good at making decisions is to do trading, because in trading you would make many wrong decisions and would correct them. If you do not correct your past decision at the right timing, you would lose money. That experience is vital.

About market

The market is all about human response, so you need to understand what the human being is in the first place. We don’t have a perfect scheme to understand human beings, but you have to know it.

On technological advancement

For instance, what 3D printer means to us is that we would need less labor in the near future, especially the blue collar labors. These technology advancements would hinder the growth of developing countries.

  Less labor demands will also come to banking business. Banks will eventually shed their employees to keep their competence, especially in retail banking, which in theory can 100% go without labor forces.

Discipline and Punish

Until 18th century, torturing criminal was grisly public spectacle even in developed countries. For instance, a man who attempted to the king was drawn and quartered in a public execution.

The form of punishment experienced notable changes from 18th to 19th century in Europe. First, the punishment became no longer public spectacle and the executioners tried to abbreviate pain of criminals (in a case, criminals are injected with tranquilizers). The change implies a whole new morality concerning the act of punishment. Second, the leniency was accompanied by the change of objectives in punishment. The punishment began to be designed to strike the soul rather than the body.

It is easy to explain the change simply as the expansion of humanity or the development of the human sciences, but that approach faces risk in missing the important perspectives, argued Michel Foucault, a French philosopher, known as the representative structuralism thinker.

In his book, “Discipline and Punish”, he analyzed the history of the modern spirit and of a new power to judge, through the study of history of punishments and prisons.

Four rules in studying history of punishment

Foucault suggested four general rules in studying the history of punishments to see it from much broader perspective, such that we can reach to the profound understanding of the social change. I believe the methodology is applicable to all the related studies:

First, he regarded punishment as a complex social function. He did not concentrate on the study of the punitive mechanisms on their repressive effects alone, but situated them in a whole series of their possible positive effects, even if these seem marginal at first sight.

Second, he regarded punishment as a political tactics. He analyzed punitive methods not simply as consequences of legislation, but as techniques possessing their own specificity in the more general field of other ways of exercising power.

Third, he made the “technology of power” the very principle both of the humanization of the penal system and of the knowledge of man. He thought the technology of power is behind both the history of penal law and the history of human sciences. He said:

“We should admit rather that power produces knowledge; that power and knowledge directly imply one another; that there is no power relation without the correlative constitution of a field of knowledge, nor any knowledge that does not presuppose and constitute at the same time power relations. These ‘power-knowledge relations’ are to be analyzed, therefore, not on the basis of a subject of knowledge who is or is not free in relation to the power system, but, on the contrary, the subject who knows, the objects to be known and the modalities of knowledge must be regarded as so many effects of these fundamental implications of power-knowledge and their historical transformations.” (page 27-28)

Fourth, he studied the metamorphosis of punitive methods on the basis of a political technology of the body which might be read a common history of power relations and object relations. In that way, he regarded the change of penal leniency as one of the power techniques.

Power shift behind the change in punishments

Foucault thought that the public execution is to be understood not only as a judicial but also as a political ritual; more precisely, he thought that the execution is the representation of power, saying: “The reform of criminal law must be read as a strategy for the rearrangement of the power to punish. … The new juridical theory of penalty corresponds in fact to a new ‘political economy’ of the power to punish.”

The cruel (and costly) tortures reflected the absolute power of monarchy at that time. The style of tortures changed, essentially because of the power shift from monarchs to the bourgeoisie. After the Revolution, new power needed to constitute a new economy and a new technology of the power to punish, and the rise of the social contract theory can be understood through this context.

The penalty changed accordingly. After the Revolution, the main penalty became imprisonment, i.e. the penalty to deprive the criminals of freedom, which is the central value in the Revolution. The characteristics of the penalty underwent the following changes:

- Unarbitrary application and public acceptance of rules

- More focus on incentivizing people not to commit crimes

- Designed to emphasize rules rather than sovereign powers

He summarizes his idea as follows:

“In the late eighteenth century, one is confronted by three ways of organizing the power to punish. The first is the one that was still functioning and which was based on the old monarchical law. The other two both refer to a preventive, utilitarian, corrective conception of a right to punish that belongs to society as a whole; but they are very different from one another at the level of the mechanisms they envisage. Broadly speaking, one might say that, in monarchical law, punishment is a ceremonial of sovereignty; it uses the ritual marks of the vengeance (retaliation) that it applies to the body of the condemned man; and it deploys before the eyes of the spectators an effect of terror as intense as it is discontinuous, irregular and always above its own laws, the physical presence of the sovereign and of his power. The reforming jurists, on the other hand, saw punishment as a procedure for requalifying individuals as subjects, as juridical subjects; it uses not marks, but signs, coded sets of representations, which would be given the most rapid circulation and the most general acceptance possible by citizens witnessing the scene of punishment. “ (P130)

Individualism and the rise of discipline

The next thing Foucault analyzed is the discipline. He pointed out the discipline experienced major change at the same when punishments became lenient. Discipline is like a substructure of the social body. While the upper structure is established by politicians and philosophers, disciplines are often made by soldiers in army, teachers in schools, doctors in hospitals, etc. Foucault meticulously looked into how discipline worked to people, by saying that discipline is political anatomy of detail, quoting Marshal de Saxe: “Although those who concern themselves with details are regarded as folk of limited intelligence, it seems to me that this part is essential, because it is the foundation, and it is impossible to erect any building or establish any method without understanding its principles.”

Discipline is composed of three factors. The first is observation - especially the apparatus that makes it possible to see everything constantly. The ultimate form of observation apparatus is that of panopticons. The second is a small penal mechanism, the informal rule which is intrinsic to the group and requires no judicial system; the penal mechanism works to correct individuals’ behavior. The third is examination, which combines the techniques of observation and the group’s internal rules.

Foucault argued that the discipline marked the moment when the political individualism takes place. The essence of discipline is that it “makes” individuals; it is the specific technique of a power that regards individuals both as objects and as instruments of its exercise. As the society put much importance of individuals, power becomes more anonymous and more functional, those on whom discipline is exercised tend to be more strongly individualized. As discipline worked to reduce the “gap” from the ideal status, after the rise of discipline, the child, the patient, the madman and the delinquent became more individualized than the adult, the healthy man, the normal and the non-delinquent man.

The birth of prison

Although prisons existed before the modern civil revolution, the penalty of detention (deprivation of liberty) was a new thing, Foucault argued.

As Baltard said, prisons are “complete and austere institutions”; prisons are the perfect disciplinary institutions in that it assumes responsibility of all aspects of the individuals, his physical training, his aptitude to work, his everyday conduct, his moral attitude, his state of mind, etc. (page 235) The penitentiary technique and the delinquent of prisons are a technological ensemble that forms and fragments the object to which it applies its instruments. In that sense, the prison is the place where the power to punish organizes a field of objectivity in which punishment will be able to function open as treatment and the sentence will be inscribed among the discourses of knowledge. Foucault thought that the characteristics of prisons are the reason why justice adopted a prison.

Remarks

This is an outstanding book. Foucault tells us how to look through the things. As Marx once said a good reflects everything of capitalism society, discipline and punishment played the same role, explaining social changes. If we just look at phenomena, we may miss the larger change (power shift in his terminology) that fundamentally drives all the changes. As Foucault showed in this book, the importance thing is to (1) look through details of the phenomena and (2) relate the phenomena to the other social changes. This analysis requires extensive knowledge in many fields, and this reminds us of learning various topics.

Reference:

Michel Foucault, “Discipline & Punish: The Birth of the Prison”, Vintage, 1995