Understanding The

Networked Economy



1. Insight 2. Analysis 3. Transition 4. Solutions

• Economic Systems • Industrial Model • Open Organizations • Networked Economy
• Economic Complexity • Neoliberalism • Full Value Economy • Token Economy
• Premodern Economy • Globalization • Distributed Systems • Distributed Platforms
• Modern Economies • Platform Economy • Platform Enterprises • Service Systems
• Post-Industrial • Decentralized Web • Evolutionary Design • Innovation Platforms


 Introduction


Towards a Networked Economy is our white paper on the transition of advanced economies into a new form of
information based networked model. We provide insight, analysis, and recommendations to help researchers and
organizations better understand and respond to current structural changes in the economy driven by information
technology and globalization. This paper is primarily focused on understanding the deep structural economic changes
that are underway as a function of increased global interconnectivity. Here, we go in-depth in our analysis of this
overarching process of change as it plays out at an extraordinary pace, looking at the primary stages of the
transformation that started in the mid-20th century and tracing how our economy becomes restructured away
from the vertically integrated formal model of the Industrial Age to the emerging distributed networked economy.


In the first section, we lay down the conceptual foundations for understanding the economy as a complex
system. We define what exactly an economic system is and the evolution of economic complexity, as we have
gone from small tribes to the vast interconnected system of today's global economy. The second section
focuses on the contemporary process of change, emphasizing the major stages that have worked to transform
the economy. Starting in the mid-20th century, we look at the rise of neoliberalism as an ideology for transferring
ownership and decision-making out of the state and into the market; how this feeds through to the development
of economic globalization and global supply chains. Next, we focus on the important role financialization has
played in transferring resources out of the Industrial Age national economic system and into global networks of
finance and trade. Then we go on to discuss the rise of the platform economy as an initial stage of shifting
economic organization to online networks and the extension of this process through the current development of
the distributed e


In the third section of the paper, we trace the underlining structural transformations that are coming about with
these changes. Here we focus on five main drivers; first among these being the shift - brought by
hyperconnectivity - from closed organizations to open networks as the primary mode of value production and
exchange. We discuss the rise of the services economy and the very profound, but subtle, ongoing
transformation in people's values. We go on to look at the rise of user-generated systems and the use of
platforms to harness the resources of the many within collaborative ecosystems. We discuss the rise of the
innovation economy that is brought about by mass automation and the shift to more agile and dynamic systems
of organization that place open platforms for enabling innovation at their core.

In the final section of the paper, we discuss how this next stage of distributed web technology and the new
economic models that it will enable can be used to respond to the central economic challenges of our time;
inequality, globalization, and sustainability. Here we discuss how the blockchain and the token economy can be
used to quantify and manage different forms of value through token systems; and analyze the workings of this
distributed token based economy while exploring existing examples. We then go on to look at the new
consensus model of distributed platforms, and how their service-oriented architecture can enable huge gains in
efficiency. Finally, we talk about the workings of innovation platforms for enabling agility, resilience and the
evolutionary transformation of organizations that will be required to navigate this age of disruption as we transit
into the networked economy.

Section 1 | Insight
 Economic Systems
To start from the beginning, it is first important to ask the question “what is an economy”? We generally think of
economies in terms of money, factories, markets, and trade. But before all of this, economies are really about value;
that is, what human beings value and how we strive to achieve more of the things we value given only limited
resources. As a cause of the inherent limitations in our world, we have to manage our available resources in order to
achieve the things we value and we call this economizing.

However, what people value though is not a simple thing, since we value many things. We value basic material
requirements such as food, heating, comfort; we value our safety and security; we value a clean and healthy
environment; we value social bonds, social recognition, trust; we value self-realization; we value meaning and context
to our lives. Whenever we strive for the highest valued ends at the lowest cost means, we perform the act of
economizing. Whenever there is a limit to any resource that people value, people will perform the act of economizing,
making choices in the allocation of their resources in order to achieve more of the things they value, whether this is
more food, energy, time, comfort, security or any other resource.

Because economies are the means through which a society tries to achieve the things it values, they are always
relative to what that society values. In economizing we design, arrange and manage our available resources to
achieve things we value; we create systems of organization to do this - the sum total of which we call an economy.
We create farms for food; businesses, and factories to produce products; armies for security; and governments,
hospitals and other institutions as rationalized and systematic methods for achieving our desired ends given limited
available resources.

An economy is an organization of natural resources, technology, and institutions with all of these different parts
having to be organized in a particular way in order to work properly. For this organization to operate effectively, it
requires different functions to be performed, but these also have to be coordinated together to create a combined
outcome. Many of the things people value can not achieved in isolation but, in fact, require the combined cooperation
and coordination of many different people, technologies, and resources. And to achieve that, we form organizations.
"The economy isn't just a system that goes to equilibrium to a state of rest, where everything
is kind of perfect and all resources are perfectly efficiently allocated, but it is something that is
called a complex system more like an ecosystem, the internet or your brain. The economy is a
decentralized system with lots of different actors who are interacting through networks, and
we have learnt that networks in the economy are incredibly important, and out of all of those
individual interactions emerges a set of patterns and behaviours" - Eric Beinhocker of INET Oxford
To build a bridge, manage a farm or transport goods, we need people with different skills together with systems of
organization to coordinate them. We train people in different functions and then develop systems of organization to
coordinate them into an effective unit, working together to achieve a combined outcome that captures some of the
value they create and then reinvests and redistributes it to the members. Engaging in the enterprise of farming or
hunting a large animal requires that members perform different activities, with those activities being coordinated in
some way towards the overall outcome. The success of these enterprises is dependent on the capabilities of its
members and the effectiveness of the systems through which they coordinate their efforts.

Because economies are systems of organization for processing available resources into the valued ends that society
desires, we can measure and quantify the effectiveness of these organizations according to how much of the desired
resource they produce relative to their consumption; what we call the efficiency of the organization. This makes some
organizations better than others and we invest our resources in those organizations that are seen to be most efficient
at creating surplus value, which can be used for development. When we first organize people and technology into a
new process, it is inefficient - the people and tools are ineffective and the coordination between them incoherent. But
over many iterations, the process becomes rationalized and more efficient. People become better at what they do,
technologies are designed and redesigned to make them more effective and organizations are coordinated in new
ways to better coordinate the activities of their members.


As these organizations become rationalized, they converge into standardized methods - procedures become
automated and solutions become cheaper and more accessible. This is the process of commoditization. As a system
becomes more efficient, it becomes more accessible and widely available. When we have fully rationalized a process
or system, it becomes automated into what we call a technology. After forging metal manually for thousands of years,
this process has become rationalized into an automated production process through which we can perform the act
more efficiently. In this way, we can generate more value at a lower cost and the economy develops. Like physical
systems, intangible processes can also become automated through institutions. After millennia of bartering over the
price of things and directly exchanging one item for another, we have developed the institution of money that
automates this process. We built the institutions of the nation-state, armies, legal systems, and taxation to automate
processes of governance.

 Economic Complexity
Through rationalization and efficiency improvements, economic systems also evolve in the complexity of their
structure. The difference between the economy of a small tribe in Zimbabwe and the contemporary Japanese
economy is, on a fundamental level, one of structural organization and complexity. Complexity is the degree to which
a system is both differentiated and integrated. It is, on the one hand, the number of different autonomous parts and,
on the other, how interconnected and interdependent they are. The Japanese economy has many more different
parts and many more systems for coordinating those different parts, making it much more complex than the economy
of a small tribe, and capable of many different functions that are otherwise not possible.

At different levels of organizational complexity, new functions emerge. There are functions that an individual cannot
perform alone. Likewise, there are challenges that small groups can not solve. We have evolved ever larger systems
of organization to enable new functions; to solve more complex challenges within broader environments.

Like everything, economic systems of organization start simple and if they are sustained they can evolve to become
more complex. Through evolution, new solutions are invented as the parts become more specialized and
differentiated and, at the same time, new connections and systems emerge to coordinate them with a constant
interplay between the two. Each level of complexity represents an overall pattern or structure to the economic system,
what might be called a paradigm. As the complexity increases, there comes to be more specialized parts with greater
individual capabilities, while they also become more interconnected and interdependent within larger systems of
organization. In every system - biological, technological or social - as the structure differentiates and the organization
increases, there is a greater demand for energy and information exchange to support this more complex form of
organization. Over the course of 10's of thousands of years, our economic systems of organization have evolved in
complexity from small tribes to clans, to states, to today's emerging global economy. 

"Individuals are limited in the things they can effectively know
and use in production so the only way a society can hold more
knowledge is by distributing different chunks of knowledge to
different people. To use the knowledge, these chunks need to
be re-aggregated by connecting people through organizations
and markets. The complex web of products and markets is the
other side of the coin of the accumulating productive
knowledge" - Ricardo Hausmann, Harvard
 Premodern Economies
An economic system is defined by both the resources it processes and the patterns of internal organization through
which it processes those resources into valued outputs. The first major systematic form of economic organization was
the agrarian economy. An agrarian economy represents a rationalized, systematic method for the extraction and
processing of ecological resources. The resources come from plants and animal muscle and they are processed
through an agricultural system of organization into the valuable resources required for human physical subsistence.
Horticulture and agriculture as types of subsistence developed among humans somewhere between 10,000 and
8,000 years ago in the Fertile Crescent region of the Middle East in a geography very different from what it is today.
People learned that planting seeds caused crops to grow and over the course of millennia a systematic set of
technologies and work processes formed around this into what we call a farm - which is in turn embedded within a
local economic system of organization where most of the needs of society are met by direct production with surplus
used for market exchange.
This engine of the agrarian economy improved the quantity and stability of food source leading to the formation of
larger populations, sedentary farms and town life, more leisure time and specialization, writing, technological
advances, hierarchical social structures and standing armies. The early agrarian period gave way to the later period
when more complex social structures in the form of states and empires arose. In less than five thousand years, the
technology that had been the privilege of a tiny minority of communities in just two parts of the world came to be the
dominant technology for most of humanity, a change that revolutionized the lives of most humans. The foraging ways
of the Paleolithic era with their small kinship communities persisted in many areas but, for the first time in human
history, they ceased to be the normal life way of humans as agricultural economies came to dominate the most fertile
and productive area of Earth's geography.
The early agrarian era represents a profound transformation in human civilization as, with the technology of
agriculture, humans took a major step toward controlling their environments and achieving a greater independence
from it. However, agrarian societies are inherently limited in their direct dependence on ecological resources. The
number of specialized technologies and functional roles in an agrarian economy is relatively low and the coordination
mechanisms between these were primarily local in nature with some exceptions. Historically, the level of
organizational complexity to agrarian societies reached a zenith with empires like that of the Romans and the Maya's
but these great agrarian empires eventually lead to collapse.

 Modern Organizations
The agrarian era lasted some 10,000 years eventually giving way to a new socioeconomic order of the modern era.
The modern era was born with a cultural and intellectual explosion in Western Europe that gave birth to a radical new
vision to understand the world around us and our place within it. This modern science gave us a radical and bold
vision of how we might see the world in terms of purely material cause and effect interactions governed by
mathematical laws of nature; laws that could be discovered through the careful scientific study of the material world
around us. This new paradigm provided the foundation to the Age of Reason; the Age of Enlightenment. For the first
time, everything was open to questioning and there was a profound optimism in our human capacity to remake our
world based on scientific inquiry and reason alone. An optimism that we could use this knowledge to build new
institutions and machines to reshape the world around us. Machines were the icons and idols of the Industrial Age, a
world that was believed to be orderly, predictable, knowable and controllable through scientific inquiry and its
application in engineering and management.

During the past five centuries, we have been developing the modern era with ever more sophistication and detail,
building a new set of industrial technologies and social institutions based upon this new knowledge, giving rise to
what we call the Industrial Age. During the Industrial Age, we applied our new found knowledge to designing and
organizing a new set of technology solutions and social institutions, alongside a new pattern of economic organization
for intercepting and processing the new energy sources of fossil fuels. The Industrial Age was a major systemic
transition within the makeup of society, as the harnessing of the new technologies of the combustion engine and fossil
fuels allowed for the development of an industrial form of economy, with the modern nation-state as the social
infrastructure behind the emergence of a new form of mass society and mass culture. During the 20th century, these
industrial technologies and management methods enabled nations to achieve, in a substantive way, the dreams of
the modern age; of universal education, healthcare, relative affluence, and democracy.

"The more we connect, the more interconnected we
become, the more interdependent we become and those
interconnections and interdependencies create a lot of new
challenges that we never thought about before. At a global
scale, at a nation-state to nation-state scale or a business to
business scale, we start to see some new kinds of
challenges that some of the mechanisms and processes we
have in place in the world don't solve"
- Alan Marcus, World Economic Forum
 Post-Industrial
As economic organizations becomes rationalized and automated, we can achieve the valued ends with less and less
input of resources. Through the development of sedentary agriculture, we developed a rationalized and automated
system for food production that allowed people to follow other pursuits, enabling industry and more advanced
systems of organization. Through mass production and the harnessing of new energy sources, we rationalized and
automated industrial processes. And again today through the microprocessor and digital format, we are
commoditizing and automating information processes and services. Through the process of rationalization, we get the
emergence of new levels of economic organization, as subsistence agriculture gives way to industrial production, to
information and services, to knowledge and innovation activities. By rationalizing one set of processes, resources
become available for the development of a new level of organization at a new level of complexity, operating within a
broader context.

Today, the nature of our economies is changing in very profound ways and this evolution of the global economy into a
more complex form is expressed through a number of fundamental vectors of change working to increasingly reveal
the limitations of our industrial systems of organization. For example, the degree of environmental degradation and
resource depletion has become ever more apparent, making the need for sustainable forms of economic
development ever more pressing. In response, we see the rise of a new form of circular economy that goes beyond
the linear model of industrial age organizations once it requires the development of complex ecosystems of resource
and energy cycles. Likewise, with the rise of sustainability and the move into a services economy, the stuff that
people value is likewise changing in very significant ways.

During the latter half of the 20th century, advanced industrial economies became increasingly integrated into a single
global economy. Outsourcing and advanced automation drove rapid commoditization of manufacturing and the
industrial sectors. People, ideas, goods, and services are increasingly interconnected on a global level that in many
ways goes beyond the Industrial Age socio-economic infrastructure of the nation state. With globalization, the scale
and complexity of our economic systems of organization are moving to a new level; the scale of such organizations is
currently moving up a level and that requires a structural change in its system of management.
Parallel to the growth of economic globalization is the rise of information technology. Mass automation; the
commoditization of basic information and service processes is requiring a move up the value chain and the
emergence of a new form of high-tech knowledge economy where innovation, creativity and fast-paced business
process and technology evolution move to the forefront; a dynamic that traditional static, hierarchical organizations of
the industrial age are poorly designed to deal with. With the rise of the global telecommunications network of the
Internet, information technology is driving the radical new phenomenon of hyperconnectivity; the pervasive
proliferation of networked organizations that are working to rapidly disintegrate the boundaries of our traditional
systems of organization. With information technology, the stuff the economy is processing is likewise changing from
physical resources to information and ideas.

All of these changes are working to reveal the inherent limitations of our Industrial Age systems of organization and
driving the emergence of a new level of socio-economic organization, on a new level of complexity. The results of
such profound transformations are organizations with more differentiated parts that are integrated on a global scale
through information networks. And unlike the agrarian or industrial economies that processed physical resources, the
resources of this emerging economy are services, information, and ideas.

Section 2 | Analysis
In our analysis of the current process of change within the development of the global economy, it is important to firstly
step back and identify the larger overarching process of change within which we can contextualize current events.
Today we have begun in very significant ways the transition from an industrial economy to an information networked
economy. In advanced economies, we see a new form of organization emerging that goes beyond the industrial
model. In post-industrial economies, we are developing an alternative form of organization - global networks - which
represents a new level of complexity, processing a new form of resource - information - and knowledge that can be
actualized through integrated systems of automated services and technology to enable continuous evolution. We are
currently moving in a very concrete way into the Information and Knowledge Age. An idea that has to date been
mostly a theoretical concept is rapidly becoming a reality and this transformation is reshaping all areas of society, the
economy, and of technology infrastructure.

In an information economy, surplus value is no longer derived primarily from the production and consumption of
physical goods - as it was in the mass society - but instead in the production and consumption of information. And
these two paradigms operate on a very different logic. This process of change will take us from an industrial economy
that was characterized by centralized hierarchical and formal organizations optimized for the processing of physical
resources and defined by the constraints of those physical limitations, to a form of information economy whose
primary structures can be identified as open networks that are optimized to process information and knowledge,
which are no longer defined so much by physical constraints but are defined instead by the inherent limitations of
information and knowledge.

The transition from an industrial form of economy to a networked economy is taking place along a number of major
vectors of change that are happening rapidly. Here we will look at four of the main components or stages in this
transition. We identify this process of change as beginning in a tangible and coherent fashion sometime in the latter
half of the 20th century and will likely continue for a number of decades to come before we have moved into a new
coherent economic paradigm. 

“Hyperconnectivity” is a term that
d e s c r i b e s a d e fi n i n g f e a t u r e o f
contemporary society. Thanks to the
Internet, mobile technology and
increasingly the Internet of Things,
people, places, organizations and
objects are linked together like never
before. More than a technological trend,
hyperconnectivity is a cultural condition"
- Economist Intelligence

The central factor that takes us from the industrial model to the networked economy is the pervasive increase in
connectivity along virtually all dimensions and levels of socioeconomic organization; a nonlinear systemic
transformation with such a wide scope of implications that it is difficult to grasp in a coherent way, but which lays the
foundations for the emergence of a new structure to our economies.

Around the world, connectivity has increased and eroded the existing centralized organizational structures within
society and economy. The wall coming down in Berlin less than three decades ago is symbolic of a cascading series
of political, ideological, economic and technological leaps which have happened in our lifetimes. If we look back at
what has happened since the end of the Cold War, we have gone from 4.5 billion people to 7.5 billion, we have seen
the deregulation of economies, the expansion of global capital markets with approximately 100 countries coming into
the global economy, and a huge rise in democratic political organization. We have seen the infrastructure buildout of
global cities and the global supply chains they enabled. Laid on top of all of this has been the rapid proliferation of the
global telecommunication network of the internet, wrapping its way around everything and working to accelerate this
pace of change to an exponential rate. Sufficed to say, this global interconnectivity is creating a systemic
transformation in our economy.

"80% [of people] living in a major city or only
an hour away… so we move from a world of
only half a billion people connected in the
1980s to a world of six billion people
connected today, five and a half billion more
people" - Ian Goldin, Oxford Martin School
 The Glorious Thirty
To understand the current transition, we will look at a number of identifiable periods that start with the Industrial Age
model and take us through to the networked economy. The first major period to identify in this transition is that of high
modernism in the first half of the 20th century, which corresponds to the maturity of the Industrial Age organization.
High modernity is a form of modernity, characterized by an unfaltering confidence in science and technology as
means to reorder the social, economic and natural world. In the world of management and production, it corresponds
to the rise of Taylorism and Fordism. Although this period may be traced back to the start of the 20th century it can be
seen to begin at the end of the Second World War and it ends with the beginning of the Great Inflation in 1973.

The general paradigm of this age was that of order, predictability and stability; that the world was rational and fully
knowable and that through that knowledge we could control our environment and organizations to delivering optimal
outcomes. Order and stability were achieved through formal hierarchical structures with clear chains of command.
The future environment was in some way knowable and procedures could be planned. Operations could be routinized
towards some single optimal outcome, as expressed by Taylorism in management theory and Fordism in production
processes.

The critical understanding was that you could standardize the world, information could be transferred up the hierarchy
and directions could be imposed through authority, which defined well-ordered solutions to the problem of production
and social order. Organizationally, we saw the emergence of large state and market bureaucracies, we saw
managerialism as the critical idea in management science, the primary legal mode is regulation, the detailed expert
development and detailed control of many processes and the assembly line. Although the rise of the market system
as an important means of organizing economic activity within society began with the Commercial Revolution some
five hundred years prior, the late twentieth century was to witness an unprecedented transfer of economic and social
organization from this stable hierarchical regulatory model to the free market system.

The period from the end of the Second World War through until the early 70s is often identified as forming a specific
economic and social paradigm in the US and Europe; a period that is often called "The Glorious Thirty" or the "Treaty
of Detroit". These decades were of economic prosperity combined high productivity, high average wages, and high
consumption. They were also characterized by a highly developed system of mature markets. According to various
studies, the real purchasing power of the average French worker’s salary went up by 170% between 1950 and 1975,
while overall private consumption increased by 174% in the period 1950-74. This era corresponded to the
popularization of Keynesian economics, which meant relatively extensive government regulation of markets and
monetary flow, relatively strong unions, and production occurring in traditional industries on a large-scale within an
economy with a strong commitment to shared prosperity.

This era largely ended with the 1973 stock market crash and the economic crisis of the Great Inflation. Following this
period, we began the shift toward what may be thought of as the neoliberal economics paradigm. One can see the
early conceptual stages of this process with the work of Friedrich Hayek and his rejection of the possibility of knowing
the world through standardization and the capacity to fully control outcomes through regulation and hierarchy. Rather,
he saw free choice within markets as capable of creating spontaneous order. Hayek recognized that prices can be an
accurate and sufficient signal of information to allow decentralized coordination to achieve the optimal allocation of
resources within society. Although the state was still seen to be needed for providing basic support, Hayek saw the
market as an optimal self-sustaining system and enabling it required converting as much as possible into private
property and contracts that would allow for those signals to order economy spontaneously.

A new conception of the individual as a rational self-interested material actor came to be formulated as a sufficient
model for predicting interventions. Self-interest was seen as foundational and collective action as tragic, therefore
privatization was needed. It was a new model that is not state centric but market centric in nature. During this period,
we also see a cultural transformation within society as the 60s gave rise to a counterculture, the new left and a
critique of authority and the formality of the Industrial Age hierarchy. Along with technological changes, these formed
the basis for an initial move away from the ideals of the Industrial Age social and economic order.

"Neoliberalism is a way of defining human beings by the market as if everything we
do is mediated through the market not just in the economic sphere but in every
aspect of our lives. That human life is defined by competition, and we are defined as
if we are simply trying to maximize our own wealth and power at the expense of
everything else, that is the description of humanity at the heart of neoliberalism that
then seeks to extend that idea"
- George Monbiot Author
 Market Logic
The later half of the 20th century saw the acceleration of a process of transferring socioeconomic organization from
hierarchical social organization to markets structures. As promoted by a new ideology of neoliberalism in the 70s, 80s
and 90s, public provision started to retreat and private production via the market started to expand into all areas. The
neoliberal paradigm is, very simply put, the logic of the market system. Although originally it may have been an
economic theory, neoliberalism came to be much more than this, as it came to encompass a set of ideas or paradigm
about human nature, economic and social organization. Neoliberalism is the free-market ideology based on individual
liberty and limited government that connected human freedom to the actions of the rational self-interested actor in the
competitive marketplace.

The key role of neoliberalism in the broader economic transformation we are witnessing was as a conceptual
rationale for shifting economic organization from people and hierarchies towards an impersonal logic of the market. In
order for it to be achieved, it had to remove power and capabilities from the nation state so that the state became no
longer the primary organizational mechanism within society but instead an instrument for enabling the market as the
primary system of organization. A battle was fought during the latter half of the 20th century for control over the state
and it was largely won by the proponents of this new paradigm.

Neoliberalism had a clear agenda to shift power from democratic systems of governance and move it into the market.
This was done through two primary vehicles: one was privatization and deregulation of national economies, the other
method was the shifting of power out of national democracies and their parliaments and into the executive and
international bodies that were not controlled via democratic procedures, i.e. IMF, WTO etc. The author George
Monbiot describes this shift of power out of the national democratic system as such: "there is no democratic
globalization and without that democratic constraint it becomes the place, a nonplace, where power resides having
fled from the democratic national forums."
The effect of deregulation and privatizing was that one part of the government was weakened, the legislature or the
parliament - the component through which the public interests are traditionally expressed - while the executive branch
of government gained powers. For example, in many nations the telecommunications industry became deregulated
and privatized. However, there are many public functions that still have to be managed for the sector to function
effectively and what happens is that inside the executive branch of government commissions are set up to regulate
telecommunications - and to regulate all kinds of other deregulated industries. Those committees are set up by
government officials but are constituted by a large number of experts coming from the industry and the corporations
in those industries.

The end result is an alliance between the executive branch of government and the large corporate actors and through
this the executive branch of government gains power. The same thing takes place with the IMF, WTO, and other
super-national regulators - who were critical actors in the last 20 years in deregulating and privatizing whole
economies. These organizations are not democratic but constituted of a great many decisions made within closed
committees consisting of powerful economic actors in the private sector; and many executive decisions made based
upon economic theory alone, without input from the interests of the broader national societies they impact in
significant ways. Moreover, these multinational institutions only deal with the executive branch of government, which
means that the more national economies were deregulated and privatized - and thus weakened in many ways - the
more power the executive branch had because it was the one who signed off with those very powerful private interest
groups.

Over the course of the late 20th century, the development of the global economic system became underpinned by
neoliberal ideology and this meant that the majority of countries around the world adopted neoliberal policies and
strategies into their own national agendas. The resulting shift of power from social organizations to markets and the
removal of constraints on the market has, in practice, meant removing societal constraints on those who have the
greatest influence within the market system. Likewise, this has removed the capacity for societies to make and
implement decisions within democratic processes. This has left people disillusioned with their governments and
resentful towards those actors that have come to have great influence in shaping the economies of nations and
everyday lives of people without their input.

"The great divergence is everything that happens in economic
history from the late 1500s to the 1970s and the story of the great
convergence is everything that happens after that. The great
divergence means the average American is 22 times richer than the
average Chinese by 1978 and today it is just 5 times, that's the
biggest story of economic history and it is probably the biggest
story of our lives" - Niall Ferguson Historian
 Economic Globalization
The rise of neoliberalism went hand in hand with the huge growth in international market exchange that we call
economic globalization. The liberalization of capital markets that took place in the 80s, the reduction in trade barriers,
the collapse of communism as an alternative economic model and the expansion of the free market system to almost
all areas of the planet - along with advances in information technology - enabled western corporations to expand out
to developing global markets and supply chains. With the expansion of corporations into new markets around the
world - together with outsourcing - we started to see the development of global supply chains supported by the global
cities network that emerged with advances in infrastructure, global transport, and that were enabled by new
information technology and trade policies.

The internationalization of national economies into what legitimately might be called a global network of trade refers
to a long-term process going back to the mid-nineteenth century. This first stage took place in the context of nation-
state sovereignty and was guided by its control to a large extent. It referred to an interconnection of relatively distinct
national economies in which sovereignty was still predominantly relegated to the nation-state. However, the second
stage that took shape with economic liberalization and the transfer of power out of the nation-state saw the formation
of a new system of organization, a globally integrated economy. This global market system came to have its own
internal logic, rules, dynamics and global processes independent of the state. Indeed, with the hollowing out of the
nation-state, it came to restructure the nation - particularly weaker nations - to its own ends as expressed in Margaret
Thatcher's famous comment "you can't buck the market.”

The outcome of economic globalization for the real economy can be understood as essentially the implementation of
the process of industrialization - that had first been developed in Europe and the US - to other parts of the world.
Countries around the world began in earnest to industrialize their economies bringing in country workers into urban
centers to work in the lows skilled manufacturing of goods that could then be exported to global supply chains. This
process removed the limitations of the national economy as the world economy could absorb a much greater amount
of production.
This process of industrialization in China and other emerging markets drove huge growth in the global economy over
this time particularly, as money was relatively freely available within capital markets. This was the pinnacle of
neoliberal economic globalization that took place during the 90s and early 2000s with the development of global
supply chains and hyper-growth in China driving the commodity super cycle.

During this time, urbanization has been one of the major trends taking place in our world as the development of global
cities and their urban networks began to restructure the nature of the nation and territoriality. With globalization,
national economies became restructured around their urban hubs, as these urban centers became the locus of
operation for the new major global corporations and financial actors providing economic anchors that linked local and
regional supply chains into the global economy.

With globalization, global supply chains began to deeply reach around the world into national territory to turn all forms
of capital - environmental, social and economic - from a sock of resources into something that is increasingly
quantified and made available for exchange on the market. In short, the combination of the neoliberal economic logic
and economic globalization have work to bring the world into one system of exchange, production, and consumption
as mediated by the market and structured by corporations. As international economic organizations like the IMF and
WTO worked to remove the barriers to the flow of goods and capital and the discontinuities between borders, the
global corporation became the central structure in the development and regulation of the global economy.

As a response to these changes, the structure of the corporation evolved away from the more monolithic centralized
hierarchy of the Industrial Age toward a more complex form better adapted to operating in the global economy.
Between 1981 and 1995 the dominant form of Fortune 500 firms changed from the multidivisional form to the multi
subsidiary form (Zey and Camp 1996). Likewise, the development of the global corporate structure to the economy
was enabled by the legal mechanics of international arbitration and the New York Convention. In the absence of a
delocalized international court system with the power to resolve private cross-border disputes, arbitration became the
preferred legal framework for corporations internationally. Arbitration increasingly brings states in emerging
economies with domestic legal immaturity into the global economy because investors can rely on dispute resolution in
national or local forums in which they feel confident.
One way of identifying this period of what is called hyper-globalization is simply through the fact that growth in global
trade outstripped global GDP growth very significantly. However, today this is no longer the case. Since the financial
crises, the growth in trade has leveled off, once again moving back down below global GDP growth. Although the
development of the global supply chain will certainly continue in a substantive fashion, this period of hyper-
globalization is now largely over - the key factors that gave rise to it have since shifted and we have moved on. The
rise of corporate profits relative to global growth that grew significantly in this period has since flattened. Likewise, the
huge proliferation in the number of multinational corporations that also proliferated during this era has flattened.
Corporations have now availed of most of the productivity gains from the development of global supply chains. The
ability for enterprises to gain competitive advantages from developing global supply chains has also now gone away
as so many have done it. Indeed some companies are questioning the need for the length and complexity of their
supply chains that developed during this era and "onshoring" has become the new hot term as choice of production
location is becoming more based on innovation, speed to market and demand instead of cheap labor.

The lasting legacy of this period of the rise of neoliberalism and hyper-globalization - with respect to the overarching
economic transformation taking place - was the expansion of the market logic to almost all areas of the planet,
bringing widely divergent far-flung people, communities and local economies into a single global system of exchange.

"What happens when supply chains, if you will, can reach every person, every resource,
reserve every element in the world? Of course, what it leads to is a very very significant
and accelerated degree of exploitation of raw materials and natural resources. Every
resource becomes a reserve, something that is just there in nature, to something that we
have measured and quantified and can reach and extract and exploit. That is of course
what is happening. We are becoming this supply chain world. The supply chain world
has been the greatest force for economic development for every single underdeveloped
society in the world, it is also led to an acceleration of climate change, deforestation,
pollution of the oceans and so forth. The supply chain world embodies both the best and
the worst of what connectivity has done to the world"- Parag Khanna, CAG
 Financialization
Another key component in this economic transformation has been financialization. In general terms, financialization
refers to the rise of the financial sector in the workings of the overall economy. As the financial system has developed
in advanced economies over the past few decades, it has become a primary source of value added. Financialization
is important to this transformation in that it represents a shift from the traditional model of industrial capitalism to the
new form of information services economy. In the United States since the early 1980s, there has been a steady shift
from manufacturing towards finance oriented activities. In her research, sociologist Greta Krippner notes that the
share of the financial sector in total corporate profits was around 10-15 percent in the 1950s and 60s. In the 1980s it
had increased to 20 percent, by the end of the 1990s it was over 40 percent. The contribution of the financial sector to
GDP more than doubled from the early 1980s to mid-2000s.

This is just one aspect to financialization. During this period, we also saw that non-financial corporations began to rely
on the financial sector and financial investments as an important source of income and profit. Even conventional
industrial firms like General Electric set up and managed financial operations - by 2001 the corporation was making
more than half of its revenue and more than one-third of its profits from its financial operations. Added to this, we can
note that households have also become more financialized, both in terms of their debt and in terms of an increase in
their financial assets. During this period, finance began to penetrate more and more into the everyday life of citizens.
One of the tendencies of financialization as identified by the researcher Costas Lapavitsas involves working people
but also households becoming financialized. That is, being drawn into the financial system both to borrow but also to
hold financial assets in many different ways. According to him, a primary reason for this is that public provision of
health, education, housing, pensions and so on have retreated during the last three to four decades and private
provision has taken its place. Private provision is increasingly mediated by the financial system and so financialization
has penetrated everyday life.

Another important development that took place was that a new corporate governance style emerged in the United
States. Finance oriented managers began to manage major corporations in the US and financial institutions rewarded
them by increasing their stock prices. Thus, increasing the stock prices became their primary motive - rather than
focusing on long-term market share productivity
innovation, they came to pay more attention to short-term
financial payoffs.

During the eighties and nineties, institutional investors

became major holders of corporate equity. Shareholder
returns became the dominant metric of success for large
corporations in developed economies and strongly
shaped top-level corporate strategy. The return on
investment for shareholders became a preeminent
concern in the formation of c-suite strategy for large
corporations - what can be seen to be a natural extension
of neoliberal economic ideas. According to this ideology,
shareholders are the legitimate recipients of the value
created by the firm, which feeds through to directly affect
how they choose to allocate their cash flows. Major US
corporations shift from a resale and reinvest strategy to a
strategy of downsizing and redistributing returns to
investors. Formally, cash flows were used to sustain the
growth of corporations but this shifted with financialization Financialization is an economic paradigm
to a strategy of trying to increase shareholder returns by where the conversion of real economic
work, externalization, and dismissals, which combined to value into financial instruments and their
enable greater cash flow redistribution to shareholders in exchange within the financial system
the form of dividends and share buybacks. Companies comes to dominate economic institutions,
were still making high profits but no longer sharing it with activity and value creation
workers as it started to flow back into the financial system
instead.
In the late nineties, leading American thinkers began to note the increasing pressures exerted on top management of
large enterprises in terms of cutting costs and improving profit. There is a move of risk from shareholders to top
management to employees and suppliers. Corporate management came to increasingly engage and identify with
financial markets and financial rational. At the same time, financial markets came to see global corporate strategy as
a key lever to value creation. The fortune 500 companies over the past decades spent trillions of dollars on share
buybacks. Top companies in high tech, as well as medium tech sectors, are often spending more on share buybacks
than on areas like human development and human capital formation, which we know causes long run growth. The
rise of the shareholder ideology of financialization is a central element in explaining this.

In the work of researcher William Lazonick, he looks at the data

behind this evolving nature of the American corporation under
financialization. He notes that by the 80s US corporations were
distributing out half of their profits to shareholders in the form of
dividends, even at that level, people were concerned that not
enough was being reinvested in the enterprise. By the late 80s,
corporate buybacks had been layered on top of this to take an
extra 30 percent, leaving only 20 percent for reinvestment. In the
90s, this did not change except the buybacks became greater than
the dividends making up approximately 50 percent of profits. In a
Harvard Business Review article, they present data showing that
between 2003 and 2012, four hundred and forty-nine companies
listed on the S&P 500 spent 54% of their earnings on buybacks,
37% to dividends with only 9% for productive reinvestment. In
some cases at the height of buyback mania companies spent
more than 100% on buybacks, dipping into reserves. At the same
time, these companies were reinvesting less and less of their
profits back into the enterprise for real economic activity.
This transformation of economic organization brought about by liberalization, globalization, and financialization
represent a historical change and it has led to a change in the class structure. A new layer of people has emerged
that make enormous profits out of the financial system. These profits are earned not by lending money but by
positioning and locating themselves within the financial system and earning huge returns from enabling transactions,
bonuses, salaries and so on. There is increasing consensus among scholars that this form of financialization
impacted, at the same time, the paychecks of the many working-class and middle-class people in a negative fashion.

The net result is that we come to find financial asset ownership becoming concentrated at the top of the wealth
distribution - particularly with the so-called 1%, which refers to the top 1% wealthiest people in society that have a
disproportionate share of capital, political influence, and means of production - and not subject to the forms of
taxation and redistribution that other forms of income are typically subject to. Financialization matters for income
inequality as we can see in research using cross-national data over time showing that finance exerted upward
pressure on income inequality in advanced countries during the past few decades in the developed nations. As
documented by the economists Thomas Piketty and Emmanuel Saez, the richest 0.1% of U.S. households collected
a record 12.3% of all U.S. income in 2007, surpassing their 11.5% share in 1928, on the eve of the Great Depression.
In the financial crisis of 2008–2009, their share fell sharply, but it has since rebounded, hitting 11.3% in 2012.

The outcome of this financialization of capitalism has resulted in a system that is, first of all, deeply unequal.
However, a system that has also been socially transformed. The powerful social layers that have emerged are not
only the owners of capital but also those who are well located in positions in relation to the financial system. They are
key bankers, key advisors and other players of the financial system - key people who can make a profit by being
connected to financial flows. These people have also come to play a key role in shaping the economy and its related
policies. Added to this is the fact that this economic system is a deeply unstable one. It isn't just socially transformed,
it's also deeply unstable because it contains finance across its structure and as we know finance is a deeply unstable
mechanism. In capitalist economies, it naturally tends to create bubbles and thus crisis when these bubbles burst.
"A derivative is an inherently leveraged product.
Because of that nature of the product, you could create
leverage, and when you create leverage, you increase
return. That was the new model, which is that we are
not going to give out loans and hold them anymore. We
are going to originate some risk, we are going to
restructure it, and we are going to distributed it to these
investors who are keen. And so there was a real push to
originate product, originate credit risk that maybe had
you been forced to hold yourself. You would not have
been so keen to hold and there was a real demand from
investors and, as a result, pressure on these teams in
various financial institutions to create product"
- Terri Duhan, Author, Ex-trader JP Morgan
In a discussion on financialization, it is important to identify what it essentially is. Firstly, financialization is not a thing,
it is a process. It is a process of converting illiquid physical assets into financial instruments that can then be owned,
exchanged and managed via the financial system. It is a transfer of direct ownership by businesses and individuals to
a mediated ownership via the financial system, which comes to mediate all forms of economic transactions, claims to
ownership and work processes, as their management becomes directed by the logic of financial markets and
institutions. The financial system can be thought of as essentially a virtual form of the economy. Whereas the
economy is the physical production and exchange of value, finance is the non-physical production and exchange of
value; it is the informatization of the economy. Through financialization, value production and exchange become
decoupled from the production and exchange of physical products within the industrial economy. Extraction of value
shifts from production and consumption of physical goods to financial services. Simply put, the amount of surplus that
is extracted from one's physical labor becomes less than that which is extracted from one's credit card as a
percentage term.

Economies are dynamic systems as they are sustained by the flow of resources through them. Finance is the
information layer that tracks and channels the flow of resources through the economy. In the industrial economy,
banks and other financial institutions took aggregate resources and reallocated them to where they are needed for
the economic system to develop, i.e. reinvest in industrial production processes. Because advanced economies have
largely completed the process of industrialization, there is now low growth rate in these economies and enterprises -
the developed nations saw steady declines in growth from a high of 4.7 percent in the 1960s to 2.2 percent in the
1990s. At the same time, the completion of the process of industrialization has created huge accumulations of wealth,
because that was what it was designed to do. On the macro-level, Financialization was in many ways a product of
this equation combined with information technology, that enabled the formation of a complex derivatives system.

The result is that money stops flowing back into the industrial model but starts to flow into other directions, into the
derivatives markets, the global real estate market - inflating prices in global cities - it flows to offshore financial
centers and emerging markets and it flows into the new internet economy. Today, if one looks at the companies with
"Finance is not financial assets, finance is about a financialization logic, that subjects
more and more sectors of the economy to its logic, it is simply a mistake to think of
finance as just a thing in itself, it is a live process that moves into more and more
sectors" - Prof Saskia Sassen Sociologist

the highest market cap, they are large internet and IT companies or financial organizations. The key aspect to
financialization is that resources have stopped flowing back into the industrial model as the global financial system
has come to dwarf the real global economy. The notional value of all derivatives contracts at the end of 2011 stood at
more than $648tn - a six-fold escalation over the past 10 years - when total global GDP was approximately 70 trillion
dollars.

Economic globalization, privatization, and financialization moved ownership and organization to markets. The net
result of the rise of the market logic through neoliberalism is that more of socioeconomic activity has come to be
mediated by market systems. As an extension of this, financialization through securitization has come to bring these
resources and claims to ownership into the financial system, where they become manage through information
technology. This transformation was an important foundation in the move towards the global network economy, but
starting after 2010 this process would be accelerated by the rise of web platforms as the internet begins to move to
central stage as a system for organizing society and economy.

“There is clearly a rising platform economy shaping our global business
landscape and affecting the lives of citizens worldwide… This new form of
organization seems to be a robust  - some would even say dominant – form
of business enterprise in the digital economy… while significant challenges
lie ahead, the opportunities that platforms reveal are enormous, tapping
into an unprecedented level of global Internet connectivity, and a large
supply of talent and software skills… to develop the platforms of
tomorrow” - CGE The Emerging Platform Economy
 The Platform Economy
Developing alongside these processes of globalization and financialization has been the rise of information
technology and the internet. With respect to the development of the global economy, the critical aspect of this process
of change has been the placing of the means of production into the hands of many and the interconnectivity between
them - through which they could connect, collaborate and exchange value outside of the traditional centralized
structures. If we look back 25 years to the beginning of the web, what happened is that - for the first time since the
Industrial Revolution - the most important inputs into the core economic activities of the most advanced economies
came to be widely distributed in the population. It began with computation, storage, and communication, then it
moved to sensing and is increasingly moving to all areas, including material production.

At the same time, network communications dropped transaction costs to a very low level, making it much easier for
people to set up their own networks for collaboration, value creation and exchange, without traditional formal
organization. This meant that production of information and knowledge could happen without large investments of
capital and overhead costs of management and transaction. This in turn allowed for production to move outside of the
domain of the market and into the domain of social production and peer production within social networks, based
upon a more complex set of motives and values than those of the pure market logic. We saw this with open-source
software, we saw it with Wikipedia, we saw it with the creative commons movement, we saw it with citizen journalism.
Core aspects of what used to be an industrial information and cultural economy turned into a social production
economy that began to seriously compete with the major economic actors and destabilize power by disrupting
traditional market logic in new ways that were previously almost unimaginable.

A central issue here is that giving a high-quality product away for free - as Wikipedia does, as Linux does, as
WordPress does - is virtually impossible for traditional actors to compete with, and thus highly threatening to
incumbent organizations that require huge capital cost and profit margins to produce a similar product. These new
open-source projects leveraged a critical new weapon that was made possible by the information networked
economy; loosely coupled distributed collaboration around a common resource to deliver overall efficiencies,
something that was significantly absent in the "efficient market" model constructed around closed organizations
competing. 

"In the neoliberal framework, if we spent 40 years, maybe even 50, learning at the academic level, at the
policy level, at the practical habits of mind level that we should all treat each other as self-interested, self-
maximizing individuals, that that's how we build organizations that are efficient. That that's how we allow
people to pursue their own happiness without being too constraining.
The commons has become a central cluster of ideas that says no that's false, we can come together
without relying on exclusive property, we can come together without relying on corporate hierarchy or on
state hierarchy, by building models of collaborative governance and by embedding our production in social
relations instead of building outside of them. Instead of building only in companies and in the state, in the
market and hierarchies of both sides, we can actually do something together" - Yochai Benkler Harvard

Starting in the early 90s, the World Wide Web began to move into mainstream usage. This first generation of the Web
is called Web 1.0 and it was all about the exchange of information - the so-called information superhighway. A person
could write information onto a website and then have it viewed by many people without major upfront capital
investment; thus allowing one-to-many communication at low cost. As Web 1.0 was all about the exchange of ideas,
media, and information, it only really began to have a tangible impact in the areas of media, entertainment, news,
education - as the displacement of Microsoft's Encarta encyclopedia by Wikipedia illustrated - and had little direct
impact on the overall real economy. However, this began to change with the development of a new set of internet
technologies that led to web 2.0, where people can both read from the internet and write to it. This new technology
made it possible for people to interact through collaborative platforms, both producing and consuming content,
creating new forms of user-generated systems as a means of production and exchange of value - not just of
information and ideas, but increasingly of physical assets.

The critical thing that changes with web 2.0 around 2013-14 with respect to economic activity, is that the set of
resources that people were sharing moved from being information, knowledge, and culture shared primarily in social
networks of informal free social exchange, to models where people were making money. Some of it was still human
capital, but other aspects of it were services, like driving someone on Uber or TaskRabbit. And some of it was sharing
material resources like Airbnb. The shift here was that the economic or market transaction frameworks caught up with
the human and social sharing networks of the earlier Web. When these came in, they opened up the possibility for
things that were much more joined with traditional markets, like transport, accommodation, retail, service markets and
much less focused on things that were purely knowledge information and culture and all for free. In this respect, the
platform economy can be seen as the merging of the social networks and collaboration platforms of early web 2.0
with the market, as it caught up with the new technology and worked to commercialize the new possibilities for
economic activity mediated through information networks. The result was that the early social, free and sharing model
- like blogging - got somewhat displaced by the market model, but also merged in new ways. These organizations
absorbed the networked, user generated model for production and exchange of services into a new platform model
that placed the traditional centralized hierarchical model for control on top of the network.

Within just a few short years, platforms rapidly scaled to become major actors in the global economy, whose scale
and profits few could ignore; the internet was starting to come of age as a system of economic organization. In
September 2014, the Chinese online commerce company Alibaba Group conducted its initial public offering, the
largest ever in history. This event attracted considerable media attention, some of it naturally commenting on the
changing balance of the global economy and the growing impact of platforms. Since that time, platforms have come
to dominate the list of largest corporations by market capitalization as people started to pay attention to the new so
called "on demand" economy.
These platforms managed to tap into the new possibilities created by widespread mobile connectivity and the
coordinating power of advanced technologies to create scale and serve untapped markets more rapidly than ever
seen before. They match suppliers and producers within platform markets and harness the untapped resources of the
end user to meet basic human needs and desires in ways that would be beyond the imagination and capacities of
traditional closed organization. They activate communities of individuals and resources in new ways, accelerating
innovation and challenge major incumbents. However, after the initial shock of what the internet can do when it
comes offline into traditional markets, large enterprises are no longer waiting around to be "disrupted". The basic
theory of platform markets is now well developed within business theory and the largest leading-edge consulting firms
like Accenture are promoting it as the way forward for almost all types of enterprises. Even the largest incumbent
enterprises today are recognizing the move into a services platform model and taking steps. In a 2016 report by
Accenture, 81% of executives said platform-based business models will be core to their growth strategy within three
years. If such assertions are to be believed - and capable of being realized - this would be a very significant
transformation to the structure of the enterprise.
"One way of thinking about what is going
on is that maybe we are moving from a
situation of having an economy with this
cool toy called the internet to a situation
where that internet is actually mediating the
economy in really significant ways, and one
of the fundamental spaces for that is
something called a platfor. The definitions
for that are kind of all over the place, but it
is really like a tool of connection"
- Nathan Schneider University of Colorado
The platform model is not only changing markets external to the organization but also changing their internal
structure. With economic globalization, we figured out that enterprise production processes and departments did not
need to be fully contained within some well-bounded entity, they could be moved elsewhere. We learned that we
could offshore entire business processes to places like the Philippines. Call centers sprang up in India and
outsourcing became the buzzword. We saw the rise of Original Equipment Manufacturer (OEM) in Asia as companies
that produce generic components that were then plugged into consumer products for retail by recognized brands. The
same producer might produce the microprocessor in an Apple phone as well as in their competitor's Samsung phone.
These OEMs relied on the scale of the global supply chains to drive down the cost of production through economies
of scale, making the mega-factories of Foxconn in Asia - an enterprise with some 1,300,000 employees - able to
produce manufactured goods at an extremely low cost per unit.

With the outsourcing model of globalization, we began to see the shift from the monolithic enterprise into the
formation of a plug and play model to the enterprise. But it is only very recently, with the rise of the platform
enterprise, that something very new has happened in the world of business. Processes and departments have not
just been offshored but they are now moving onto cloud platforms. As the enterprise moves into the cloud, it makes it
easier for them to simply plug into scalable services on-demand in order to run the internal workings of the
organization as well as their supply chains. Salesforce is one good example of this, a plug and play service in the
cloud that enterprises can connect into to manage their customer relations, marketing, and sales.

Over the last few decades, driven largely by digital technologies and massively increased connectivity, the economy
has been moving beyond narrowly defined industries built around large, vertically integrated, and mainly “self-
contained” corporations. New means of creating value have been developing everywhere in the form of ever-denser
and richer networks of connections, collaboration, and interdependence. Sufficed to say, the enterprise is now
morphing into a new form of network. The rise of enterprise ecosystems can be seen as the appropriate adaptive
response for the enterprise as it works to harness the new opportunities that are available due to the increases of
market size through globalization. And thus the greater potential degree of differentiation - the increase in ease of
connectivity and the increase in the complexity of services and technologies that they are required to deliver.
The CEO of Nokia described the evolving landscape of ecosystems
that each encompasses an array of players: “The battle of devices
has now become a war of ecosystems . . . our competitors aren’t
taking our market share with devices; they are taking our market
share with an entire ecosystem. This means we’re going to have to
decide how we either build, catalyze, or join an ecosystem.”

We used to live in a world where commerce flowed linearly. Firms

added value to products, shipped them out and sold them to
consumers. Producers and consumers held very distinct roles.
Value was created upstream and flowed downstream. Now, market
upstarts are displacing market leaders faster than ever before as
entire industries transform. We are in the midst of a seismic shift in
business models, powered by the Internet and a generation of
connected users. Business leaders, today, develop platforms that
connect diverse participants with one another and enable them to
interact and transact. On the Internet, anyone can be a producer.
Today’s network platforms aid the creation of entirely new markets
by connecting producers and consumers with each other. Three
forces are powering the rise of platforms: ubiquitous network
access with ever-increasing mobile penetration, reputation systems
that enable trust among distributed strangers, and access to low
cost-shared infrastructure with tools and data to capture and
coordinate interactions.
"In recent years, an important idea has
been spreading around the world. The
businesses of many shapes and sizes can
thrive and serve customers better as
participants in ecosystems. More
collaborative and varied, more adaptive and
nimble than traditional industry structures
and value chains, ecosystem is a useful
metaphor that points to a deep
interdependence across players as they co-
evolved and together create and share
resources. Everyone contributes,
benefits ,and is invested in ensuring the
sustained success of their collective
common interests"  
- Deloitte US, Business Ecosystems Come of Age
The key mantra of venture capitalists in financing the platform economy was all about network effects, a scaling
strategy that rested on the positive feedback of networks, where more users worked to create a more valuable
product. Platforms are not really like businesses in the traditional sense, they are more like industries. Through
network effects and lock-in dynamics they are known to take over whole industries, creating a winner takes all
dynamic.

For example, booking.com in the online hotel booking industry. They took almost the entire market. Amazon in retail,
Uber for mobility. Facebook and Google have something around 70 - 80% of the U.S. digital advertisement market,
and according to the analysis conducted by Pivotal Research, they took virtually 100% of the growth in the U.S. ad
market in 2017. More and more with online platforms, we see the situation where it is about just one or two players
that dominate the entire market and the old players then become part of that platform. For example, in Berlin, if you
take an Uber, you're actually often getting picked up by a regular taxi because they use the Uber platform to get the
business. The largest growth market for Amazon at this time is not them selling their products to the customer, it is
selling products from different - often traditional - businesses that are underneath that.

This concentration of markets has led to mounting critics against the large online platforms as concentrating too much
power, and as distributing an unequal proportion of the value that is created to the users. Uber is one good example
of this. Today's critics of Uber are about the use of centralized hierarchy, the use of algorithms to control and extract
rents, and about forces of exclusion. In a study by the JP Morgan Chase Institute, they looked at the bank’s checking
account customers and found that only one percent of adults made money from online platforms in any given month.
Platform companies like Apple, Alphabet, and Facebook are the most profitable on the planet. And as people are
starting to ask questions about where that value is really coming from, they are quickly coming to the realization that it
comes largely from the work of the user and are increasingly starting to ask questions about the distribution of power,
ownership of data and distribution of value.
"It is not enough to build a decentralized
technology if you do not make it resilient to
reconcentration at the institutional,
organizational or cultural level. You have to
integrate for all of those”
- Yochai Benkler Harvard

What is the outcome of the move into the platform economy? Neoliberalism and globalization moved ownership from
monolithic bureaucratic institutions to the semi-distributed system of the market, while financialization virtualized that
ownership and exchange of value. The platform economy takes this process a step farther, connecting up physical
assets to online networks as real economic activity becomes coordinated and directly mediated by online networks of
hundreds of millions of users. It opened the market system for direct access by the masses in a semi distributed
fashion, while the management hierarchy of the centralized organization is greatly reduced as direct coordination and
management of operations are shifted to algorithms in the cloud. With the platform, economy markets became open
to the masses and mediated through the internet, where basic management processes could be automated through
algorithms running in data centers.
The development of web 2.0 also plays another important role in the transformation in that we began a move away
from the idea that markets and economies are solely about maximizing financial gains. Economic activity became
reintegrated in a significant way with social networks. It was recognized that this economy was not driven purely by
cost-benefit utility functions but also a much more expanded value system was at play in how the economy worked. It
was widely discussed how people were quick to adopt the on-demand economy not simply out of pure economic
utility, but because it often provided an extra social or environmental dimension the people felt was missing in the
traditional market transaction model. On the production side, social and cultural capital were also coming into play as
a motivator. The open-source movement was a very explicit illustration of this, but in more subtle ways, social
networking was also changing the mainstream conception of marketing as economic success was becoming more
closely tied to one's social capital within social networks. It became clearer that the capital that one had in one's
social network could, in a mediated form, be converted into real business value.

In the past decades, this process of economic transformation was driven by corporate structures and the financial
system - who will, of course, continue to play a major role - but after the platform revolution going forward, the centre
of this process of change will be happening on the internet as technology and economic development are starting to
become one. The platform economy took us one step closer to merging new web based networks with the
management of our global economy. It gave us a greater glimpse into the networked economy and for the scale of
change underway as the term disruption became prevalent. However, it is safe to say that the largest, deepest and
most disruptive structural changes are still ahead of us as the information revolution continues at full pace, with a new
technology paradigm emerging that will have profound economic consequences; consequences that go far beyond
what we have seen to date and will likely happen at an even faster pace.

“The web is more a social creation than a technical one. I designed it for a
social effect - to help people work together - not as a techie-toy. The
ultimate goal of the web is to support and improve our weblike existence in
the world" - Timothy John Berners-Lee Inventor of the Web
 The Decentralized Economy
Economic globalization shifted ownership and organization of resources to markets and began the long process of
bringing all spheres of activity on to a single value exchange platform of the global economy. Financialization worked
to virtualize that system converting it into information. The platform economy began the long process of merging the
new technological possibilities of networked organization with the existing economic structures. With the platform
economy, we manage to partially combine the traditional industrial age centralized structures of economic
organization with the new networked structures that are emerging out of the internet. Today though we are starting a
new stage in this process, where we can begin to see the complete process of convergence and the end product of
what a networked economy would actually look like.

This information economy that we are moving into is an advanced form of economy that is critically dependent upon
technology like never before. An information networked economy is one where the underlying technology, the flow of
information and economic organization become one; the development of information technology becomes directly
correlated to the formation of new economic structures. We saw this most clearly with Web 2.0, in how fast the
change in technology was translated into new economic patterns that rapidly disrupted whole industries. With the
rapid proliferation of information technology to all spheres of activity, we are currently going through a process of
convergence of existing structures of economic organization and the global information platform of the internet. The
primary physical organizational structures of our economy, supply networks, the financial system, and corporate
structures are merging with information technology to become integrated and organized via the internet.

This next stage in the process of transformation of our economy is enabled by a new set of information technologies,
as we are currently in the process of remaking the technology stack of the internet, building what is variously called
web 3.0 or the decentralized web - a primary component of which is the blockchain. The defining feature of this next
stage of economic development is that it decentralizes our economy and shifts operations to global information based
networks like never before, with truly profound consequences.
The global economy can be understood as a market where exchanges are recorded in ledgers, with centralized third
parties and middlemen - such as clearing houses, banks, governments, enterprises etc - used to record, validate, and
facilitate the transactions in the system. Banks, notaries, accountants, and governments are the "trusted third parties"
that validate transactions, keep records, and enable our economies to function. This makes our economies critically
dependent upon these third parties. With the platform economy, we extended this model to web platforms; we
developed new feedback system to enable trust between peers. But ultimately, the network was still dependent upon
both offline centralized organizations and these large platforms. What is changing with Web 3.0 is that cryptography
and distributed networks make it possible for many of the functions previously provided by centralized organizations
to be provided via distributed networks in an automated consensus model.

This distributed internet technology stack that is currently being built enables a network of computers to maintain a
collective database of value ownership and exchanges via the internet. This bookkeeping is neither closed nor in
control of one party. Rather, it is public and available in one digital ledger, which is fully distributed across the network.
The most mature example of this is what we call the Blockchain. In the Blockchain, all transactions are logged,
including information on the date, time, participants and amount of every single transaction. On the basis of
sophisticated mathematical principles, the transactions are verified by the so-called miners, who maintain the ledger.

The mathematical principles also ensure that these nodes automatically and continuously agree about the current
state of the ledger and every transaction in it. If anyone attempts to corrupt a transaction, the nodes will not arrive at a
consensus and hence will refuse to incorporate the transaction in the Blockchain. Every transaction is public and it
works through thousands of nodes unanimously agreeing that a transaction has occurred and the given details of the
assets and transaction. This way, everyone has access to a shared single source of truth. This distributed consensus
architecture coupled with advanced encryption makes the Blockchain greatly more trustworthy and secure than any
centralized institution that represents a single point of failure and that may have incentives to alter the information
itself.
These distributed ledgers are records of value, meaning they can account for and validate the exchange of any form
of value; it may be a currency, it may be property, it may be a kilowatt-hour of energy, a barrel of oil or a bunch of
bananas. This makes the blockchain a potentially revolutionary technology for economic organization.

The Decentralized Web

Decentralized Shared Database Peer-to-Peer Automation

No centralized authority Shared database securely Direct exchanges of value Automated transactions with
managing the network. encrypted enabling trustless from peer to peer programmable rules
Instead, distributed interactions
consensus
Whereas web 1.0 and 2.0 became centralized around large data centers and platforms, web 3.0 is essentially just a
set of protocols that allow people to connect to each other within peer-to-peer networks, conducting transactions
directly and securely without the centralized platform, all sharing one common database that all can trust because of
its transparent nature and the need for consensus among peers. This offers the potential for radical efficiencies in
overall productivity in creating one database that all have access to and can trust, without depending on centralized
authorities for authentication. Likewise, it enables direct peer-to-peer secure transactions that can be easily
monetized, meaning that very small contributions or exchanges of value - that were previously not captured or only
captured for centralized organizations - can now create revenue streams for the individuals creating them and do
away with the cost of transaction.

What will change with the distributed Web is that the internet will stop being so dependent upon traditional revenue
streams - selling traditional advertisements and products. This is like the teenager eventually growing up and getting
their own job, as it will create a place where people can come together and create value independent of traditional
centralized organizations. The distributed Web will merge networks and economies as the flow of information and
economic value becomes one. Whereas previously we had an internet patched onto the side of the economy with
only a very limited amount of resources flowing through it via advertising and e-commerce, with the decentralized
secure web value of all kind can now be encoded into the internet and exchange, creating its own economy. This is a
very significant change as the distributed platform economy will merge markets and networks as the primary
organizational structures of our world - the global economy and internet - become one.

"The Decentralized Web is a system of interconnected, independent, privately

owned computers that work together to provide private, secure, censorship-
resistant access to information and services"
- Feross Aboukhadijeh Founder, WebTorrent External link
Currently, the development of online platform markets built on the blockchain is growing very rapidly and outside
investors are starting to take note. The first initial coin offering (ICO) in history was that of the Ethereum network in
July 2014, which raised $13m (investors from back then now yield a multiple of 500x). $300m have been raised in the
12 months up to may 2017 and the movement is accelerating very sharply. In April 2017, $81m was raised during 11
ICOs with an average of $7.3m per floatation. There was a very high level of investor interest, with raises completed
in less than a week, sometimes in just a few hours. $12m in 6 hours for iEx.ec, $5.6m in 24 hours for Matchpool. With
regards to the number of projects currently in the making, it is fair to say that this is just the beginning.

Total Market Capitalization of All Cryptocurrency

With the millennial generation, we are seeing clearly a major clash between the existing hierarchical structures for
organization and a generation that is more normalized for the information network-based organization of the web.
Millennials have grown up natively in an individualistic world, where they expect more and more that their work
expresses who they are. That it is not simply about getting money or climbing up the hierarchy in the office, but that it
expresses something important about what they believe and who they are. What they want to do with their lives.

Most of these people have lost faith in traditional institutions of the Industrial Age and join the traditional formal
organization because, at present, most of the capital and resources are still there and they know of little else making
it a default mode. However, this will change. Those entering the workforce in the coming decade or two will be even
more adapted to the peer networked informal model of organization, even less interested in simply fitting into existing
hierarchical economic organization. The other key element will be that, as the blockchain internet develops more and
more, money will flow through online platforms, making it greatly more viable for people to simply opt-out of the
routine nine-to-five life within the traditional business organization.

As we expand upon in a coming section, the decentralized economy works through a token system, where each
platform creates a token that represents the underlining value that is being created and exchanged within that
network. People can then invest in that micro-economy by purchasing the tokens and likewise use them in that
ecosystem. Through this token system, ultimately, what blockchain will do is create a whole new economy and value
system outside of the traditional utility based economy. As more of the traditional form of utility value flows into the
token economy, this will enable people to move out of the traditional economic structures as the new full value
economy is born and people move to the new economy based on token networks build on the distributed web.
"We should think about the blockchain as
another class of thing, like the Internet—a
comprehensive information technology with
tiered technical levels and multiple classes
of applications for any form of asset registry,
inventory, and exchange, including every
area of finance, economics, and money; hard
assets (physical property, homes, cars); and
intangible assets (votes, ideas, reputation,
intention, health data, information, etc.). But
the blockchain concept is even more; it is a
new organizing paradigm for the discovery,
valuation, and transfer of all quanta (discrete
units) of anything, and potentially for the
coordination of all human activity at a much
larger scale than has been possible before”
- Melanie Swan, Blockchain Blueprint for a New Economy
Governments, hierarchies and power structures have, throughout history, been built upon the flow of resources,
whether this was taxing people at ports or the taxation of markets. The rise of the modern nation state went hand in
hand with the Commercial Revolution as it provided a standardized and efficient regulatory environment for doing
commerce over a large area. The traditional nation state was built on this flow of resources within the national
economy. Again, we saw this with the rise of the multinational corporation as managing the flow of resources within
the global supply chains that developed with economic globalization. We have seen it with the rise of powerful
financial actors as more resources started to flow through the global financial system, and we have seen it with the
rise of platforms. Today, these flows of resources in the form of data, attention and financial capital are moving out of
the national economic system and moving to global networks and increasingly the internet. This will provide the
resources for new structures to emerge. But just as importantly, it means that structures build on the flow of resources
through the industrial national economy will no longer receive the resources they require to sustain themselves.

With financialization and globalization, we saw for the first time money being taken out of the industrial economic
model. With the platform economy, it started to flow into online platforms. As the infrastructure to the distributed
economy built on web 3.0 matures, finance will start to flow into this new value system. The move of financial and
economic transactions to blockchain platforms is the move of money into the global economy, it won't be flowing back
to the national economy. In a financialized global economy, flows of finance are really what makes the world go
round. As those flows start to move into the token platform economy, this will have a very corrosive effect on the
industrial political economy. It will become even more apparent that money is not going to flow back through to
finance that nation-state that is already highly indebted. Already today nations states are highly leveraged and they
cannot deliver on what they used to promise. This is part of their loss of legitimacy, among other things. This
redirection of flows of value will put them under even more strain in the coming years.

The main issue that we are facing is that we have come to the end of an economic paradigm. There is no more high
growth in the industrial economic system and thus finance does not want to flow back there, due to low returns on
investment. As the blockchain platforms become more mature, secure and stable, and people begin to understand
how the new paradigm works, money will flow from the existing financial system into crypto finance and the
distributed token economy. As that happens, it will be a game-changer for the whole system as it will move the bulk of
economic resources into web based networked organizations and out of the centralized formal organizations. This
could be a critical point, when things start changing in a very substantive fashion. If capital will start to move very fast
into the token economy, that will have a crippling effect on existing structures along many dimensions as the crisis of
legitimacy in existing institutions will become accentuated if they don't have the resources to fund existing models;
such as much of the welfare state, pensions being one major issue. These factors could provide the incentive for
people to "drop out" of the existing system like never before. Indeed, this is already what we can see on the fringes.
As the value of cryptocurrencies rise and the distributed economy expands, people simply no longer need to work
within the existing hierarchies.
Even with the huge market caps of platform enterprises like Apple, Alphabet, and Facebook, the money that has gone
into the internet is still just a small relatively insignificant fraction of what moves around in the global financial
systems. Most of the money is in derivatives markets not wanting to go back into the traditional enterprise, while the
platform economy as we know it can only absorb a small amount. As we develop the underlying technology, as our
understanding of the distributed token economy matures, and as venture capitalists come to develop a new narrative
with which to recognize the emerging paradigm, this money may well flow into the development of a new form of
networked economy, which would have a huge impact given the sheer scale of it.

"The passion of Bitcoin users stems from the fact that they don’t just use the product,
but they also have an ownership stake in the product and directly benefit financially
from its success. Utility + ownership fosters a user base who also become passionate
engineers, marketers and salespeople. A decentralized global ledger is useful, but we
wouldn’t be talking about Bitcoin if it was just a decentralized global ledger... The
product becomes more useful as more users join and demand for the token increases
as a result, which increases the value of the ownership stake for users"
- Nick Tomaino investor at Runa Capital
The distributed stack of web 3.0 will be the technology that enables the true merging of the global economy with the
global platform of the internet to create a true information networked economy. And the outcome to that process will
be an economy that is both an extension of the major economic trends in our world today but that will, in fact, look
very different from what we know today as, with the convergence of these different major networks, a new paradigm
will form.

What we will see is that the blockchain is really the tool for moving the economy to become mediated directly through
distributed internet protocols and algorithms. This is a huge transition but it may, in fact, happen very fast due to a
number of reasons. Firstly, the distributed web ecosystem is growing fast and increasingly connected with traditional
investors, as venture capitalist are coming to recognize the significance of the technology and how the token
economy might work. Secondly, much of the physical technology is already in place. Thus, unlike Web 1.0 and 2.0
where we had to lay fiber-optic cables, undersea cables, install data centers and internet routers before it was worth
trying to create websites like Youtube to stream videos, with web 3.0 a large percentage of the physical technology is
already in place, it is primarily a question of redesigning and rewriting the software stack.

Lastly, not only does the distributed web have the same kind of powerful network effects - that drove the exponential
growth in social networks - it also has the addictive nature of the profit motive, as this time it is not just about likes and
shares, it is also about money; something that is very quick to capture people's attention and hold it. It is likely that
the first breakout apps will be explosive because they financially incentivize users to participate in the network.
Combining the stickiness of social media with economic incentives will make for a very attractive force. Although
much of the technology infrastructure still needs to be built out before mass scale adoption would be viable, these
factors - along with the fact that people are already getting used to major technology disruption and are less inclined
to laugh at the idea of major change - could make the move towards the distributed platform economy a very rapid
one indeed.

We are seeing now, suddenly, a lot of new digital technologies, including cloud computing and
big data and artificial intelligence, cognitive computing,  robotics, Internet of Things and 3d
printing, virtual reality, blockchain technology; all that is suddenly here and it's all with the
potential to transform business models, products and services. But also entire economic
sectors, the economy as such, and the society as well, so we'll just see in the next decades of
fundamental transformation  of our society - PWC, Tech Breakthroughs Megatrends
Section 3 | Transition
During the current period, from the initial liberalization of national economies and for the next few decades, the global
economy is going through an unprecedented expansion. On the global level, we are witnessing the most rapid
expansion of the global middle class ever seen - given the OECD definition of the global middle class being people
with an income of 10-100 dollars per day. According to Brookings Institute, around 2020 the middle class will become
a majority of the global population. They estimate that in 2009 there was 1.8 billion people in the global middle class,
which will grow to 4.9 billion by 2030. Over the course of just the next decade, we will expand the global middle class
from some 3 billion to almost 5 billion.

At the same time, there is an ongoing environmental crisis that is set to get worse in the coming decades. Coupled
with this are major issues with the imbalance of the distribution of wealth and economic inequality, which is likewise
tied to major changes taking place in the workplace due to automation that threatens to leave a large section of
populations underemployed. Such a large-scale mass of people excluded from the gains of growth, in turn, threaten
to splinter societies along new divides and create political unrest.

The World Economic Forum annual 2017 Global Risks report found that rising income and wealth disparity, and
increasing polarisation of sectors of society, were ranked first and third among the underlying trends that will
determine the shape of the world in the next decade. While walls and inequality are coming down between societies,
they are going up within them. Almost everywhere around the world inequality is rising within countries and a large
part of this is a function of the current pace of change; when things change faster, people get left behind quicker.
Societies are becoming less and less inclusive. Those at the leading edge of globalization and technological change
are doing disproportionately well, while many are being left behind.

The WEF report notes that the growing mood of anti-establishment populism meant economic growth was no longer
enough to mend fractured societies and that “fundamental reforms of market capitalism” are needed going forward.
They note that these factors call for "a rethink of the growth model, the growth model that we have been following for
the last years does not deliver in terms of increasing the incomes of the population and there is a call for a more
fundamental rethink that would now be needed of how we generate growth and how we redistribute wealth within
society as well.”
Our existing Industrial Age model of economic organization may have been at least somewhat sustainable in a pre-
globalized world, where it only really included some 20% of the world's population in developed economies while
some 80% of the world's population was largely excluded. But as we bring in the majority of the world population to
the global economy, we are hitting real limits. In this context, it is often recognized that our current economic model of
the Industrial Age is fundamentally unsustainable even at the limited scale that it currently operates at. Expanding to
become a truly inclusive global system would involve major changes in its deep structure. In this section we explore
these major structural changes that are currently underway and which are leading to the formation of a much more
complex form of networked global economy.


Expanding Global Middle Class

1.8 B 3.2 B 4.9 B

2009 2020 2030

 From Closed to Open Organizations
The most fundamental structural change that comes about within a networked economy is the shift from closed
centralized systems of organization to open distributed organizations as the basic infrastructure to economic
production and exchange. For the creation of economic value at scale, it is required that members coordinate their
activities within some form of organization, which can then produce some product or service of value and remunerate
its members through the distribution of the revenue derived from that production process. A central issue in this
process is in how do we create these systems of organization where people can trust each other and the
remuneration is distributed in an acceptable manner. Without this, the members will not partake in the organization.

During the Industrial Age, we achieved this through creating closed centralized and hierarchical organizations, where
the rules are defined by the management and the trust and coordination that enable economies and society to
function is maintained by centralized organization. However, this closed form of organization has its limitations. Our
Industrial Age economy was defined by centralized organizations; a structure of organization where information,
control, and ideas flowed in a vertical direction within the organization while, outside the boundaries, organizations
competed in the market. The move from the traditional form of organization into the networked model happens
through an increase in nonlinear, local, peer-to-peer interactions that cross the boundaries of traditional organizational
structure. Thus, rendering them less effective as it becomes ever more viable to create distributed organizations
through peer-to-peer networks that can be highly effective.

Increasingly, the most valuable resources within society are outside of any single organization's boundaries, they are
in networks - whether these are global supply networks for physical resources or the internet for information and
ideas. Likewise, with IT, as information stops flowing in a linear direction but increasingly in all directions, people are
becoming more connected between organizations than within the confines of any closed organization.
Organizations are at the end of the day nothing more than a set of people and resources that are connected and
coordinated. As those resources increasingly come to lie outside of the organization and it becomes much easier to
create connections with others horizontally outside closed organizations, a new form of economic organization
emerges; distributed open systems that are normalized for a networked economy.
The third component to this is the nature of the resource that is now being processed. A networked economy is also
an information services economy. The resources it processes is not physical goods but information and ideas, which
have very different properties. The engine of the industrial economy was the concentration of capital and production
processes so as to achieve economies of scale and reduce unit cost. This centralization process drove the
concentration of the means of production into specific centralize locations - most notably the factory - and
removed it from the mass of people - previous cottage industry -
creating a strong divide between producers and consumers.

Unlike the tangible products of the Industrial Age, information and

ideas have the quality of tending towards immateriality and this
can radically reduce the cost of production and exchange. With the
revolution in digital computing and telecommunications,
information and ideas now have the quality of being capable of
being duplicated at virtually zero marginal cost and this has major
implications for the organization of economic activity, as marginal
cost formed a key part of the industrial mode of economics. The
distinction is that of marginal cost - physical goods invariably have
a relatively high marginal cost, that is to say, it costs a significant
amount to produce one more unit, while information services can "We are shifting ownership of the
be duplicated a virtually zero marginal cost. means of production from centralized
What has changed today is that the means of production are now institutions to distributed groups of
widely distributed amongst the population. Not just in developed people, sort of in the crowd, so to
nations, but around the globe given the distribution of speak. This blurs the lines between
computerized devices to almost everyone on the planet - 7 billion personal and professional, it blurs
plus mobile phones - and the cost of production is potentially the lines between casual labor and
almost zero. A fourth key component is the development of
full time employment"
- Arun Sundararajan, NYU
automated software platforms for the coordination of production and exchange of value. This is important because it
removes the need for large centralized hierarchies of management for coordination, which restricted the potential
scale of the organization due to the bottleneck that it creates, and makes the limits and complexity of the organization
only limited by the complexity of the algorithms, once given the technology infrastructure.

This is the foundation of the networked economy. The fact that the means of production are widely dispersed within
the population, that people are connected horizontally and that the marginal cost is so low that the benefits from
interpersonal and inter-organizational collaboration are greatly increased. Added to this we now have the automated
computerized systems to enable complex coordination within huge networks, without large centralized management
structures.

As this infrastructure to the information economy develops, the default mode for economic activity is shifting from
closed competition in the market, to open collaboration within networks. This changes the nature of the game and the
rules of success as the emphasis shifts from the management of closed organizations to the development of open
networks for coordination. We can see this process of change as it has evolved over the past decades as we went
from the formal stable hierarchies of the industrial age state and enterprise of the early twentieth century, to the rise of
the impersonal market system as a network of organizations competing, to the platform economy where organizations
became networks of millions of users with only a very small centralized organization. This process continues today
with the rise of the distributed web, where this process is being taken a step further removing the centralized
organization almost completely as organizations become distributed networks with members interacting directly peer-
to-peer. Both creating and consuming the content, but also actually owning the organization to a large extent, through
the use of token systems.

"The ability at cost to coordinate activity
within a single institution is much less
than trying to coordinate activity across
multiple independent institutions, that
was a very compelling and accurate
description of the institutions that
emerged during the twentieth century,
scalable efficiency drove the success of
those institutions. I would like to
suggest that that rationale is
diminishing in its impact today. Largely
as a result of the digital technology
infrastructures available to us, the
ability to coordinate activity across
massive independent entities is
decreasing at an ever rapid rate"
- John Hagel, Deloitte's Center for the Edge
 From Utility to Value
Everywhere, economies are about what people value; value is the foundation of economics. How we defined value
and incorporate it into the model of the economy will inevitably shape all aspects of that economic system. In this
respect, a second major shift that is taking place is a reformulation of value; an expansion of economic value from a
unidimensional form to a multidimensional form. As societies reach the end of industrialization, affluence increases
and people begin to acquire a new set of expanded and more complex values. As the famous saying goes, a person
without food has one problem, a person with food has a thousand problems.

The process of industrialization was one of improving the basic material standard of living for the mass of people. In
this way, what people valued was relatively limited in scope and it was possible to define it in terms of well-bounded
physical products; our economic theory and organization that we inherit today is a legacy of this. The broader concept
of value in this model is interpreted in a very narrow sense, in terms of products and utility. The result of this is
currently a major mismatch between our models and what is required. Our economies are currently dependent upon
some organization delivering products that they believe to be profitable to them, when in fact what is needed is an
economy that delivers what people value along all dimensions.

As the economy develops into a services model and people's value expands into new domains, this formulation is
proving ever more restricted, and there has come to grow a huge gap between what people value and want from their
economies and what those systems are designed to produce. We currently have an economy that is setup to stay
churning out more products and producing negative externalities from this for society and environment, when in fact
society is saturated with such products but increasingly desires those resources that the economy is depleting
through its externalities.

With globalization and environmental degradation, these externalities have become a major issue threatening the
very basis upon which society and the economy dependent. We currently make amends for this by patching this new
value demand onto the sides of our existing economic framework, placing Fairtrade symbols on the side of products,
organic symbols or sustainable certificates. We have already made significant moves into the multi-value economic
model through the growing recognition of the limitation of the single metric of GDP as a catch-all metric for economic
development and the creation of new metrics, such as the Human Development Index (HDI). Parallel to this is the
development of new forms of financial instruments such as social impact bonds, ethical bonds or green investments
that have all worked to introduce the idea that financial instruments, even on a technical level, can incorporate
measures of value along more than one dimension and thus creating an economy for these different forms of value.

However, these are small steps compared to what is ahead. The shift that takes place in a post-industrial economy is
a function of the fact that people now have a sufficient amount of basic materials as quantified by utility value, but at
the same time, the degree of loss of natural resources and social capital becomes more apparent. At such time,
people come to recognize the real value of these things only when they are gone, at which point they begin to be
prepared to place a real value on them and we can then create an economy around that, which can be used to
economize on the now scarce ecological, cultural and social capital.  

Going forward, the economy will increasingly move away from the unidimensional conception of utility value that
came to dominate economic activity,, transiting towards a full value model, where different forms of value are
accounted for and economies are created to do this; social and natural capital become no longer a nice to have but in
fact become core economic activities. A major part of the restructuring process that is taking place today and will, for
decades to come, is the move from a single value economy to a full value economy; an economy that accounts for
the full social, environmental, economic and industrial value so that all forms of value can be dealt with in a
systematic way.


"If individual preferences change in response to education, advertising, and peer pressure
then value cannot solely originate with individual preferences. Values ultimately originate from
within the constellation of shared goals to which a society aspires — value systems — as well
as the availability of ‘production technologies’ that transform things into satisfaction of human
needs" - Economic & Ecological Concepts for Valuing Ecosystem Services
An important factor to note here is that this does not mean a simple extension of the existing process of
commodification, but in fact a subtle but important modification of it. The thing to note is that this transformation will
not fit inside of the existing box by simply placing dollar values on everything. It requires a differentiation between the
different forms of value, but also some capacity to exchange between them. Social capital is different from financial
capital, which is different from ecological capital and cultural capital. At the same time that advances in information
technology will enable us to bring these different forms of value on to common platforms, we will also be challenged
in very significant ways to question their differences.

Our current economic theory - and economic system that derives from it - is largely based on the subjective theory of
value. Things have value only in people's subjective appreciation of them, which creates an interplay between supply
and demand and a single homogeneous market price. However, the domain of behavioral economics already has
begun this process of moving us away from the dominant paradigm of utility as it has started to question the rational
actor utility model, identifying the many examples where in it breaks down and introducing the many ways in which
people value things that does not fall within the traditional model to value.

The many negative externalities that the market system based on this formulation of value have had require us to
expand the formulation of value to incorporate the many different kinds of value. That way, they can also be
accounted for and managed within the system, and thus reducing the current arbitrage and negative externalities that
are a central part of the sustainability crisis. This means a major reformulation of our conception and models of
economic value, one that recognizes both subjective and objective value. Both the immediate utility that something
has to a person and the intrinsic value that something has - like the diversity of species within an ecosystem that
enables it to sustain itself over time. In order to rebalance the economic system and make it sustainable, this needs to
be done not just in an ad hoc way but rather in a systematic way, which means accounting for this intrinsic value
within society and economy and factoring it into the economic system. Such a process has already begun - in an
informal way - but going forward, it will become greatly more systemic, powered by the blockchain.
"We don't live in an empty world any
more… when we had a lot of frontiers,
when natural capital and social capital
were not the limiting factors and we
need to reinvent what our goals are in
this new context and that process of re-
visioning has to be an ongoing process
and I think we have the technology now
to actually begin to start to do that”
- Robert Costanza Crawford School of Public Policy
 From Centralized to Distributed Organization
Financialization one-off expanded the scope of finance to a multiplicity of new instruments, but it remained within the
same single conception of value. Where we are going now is to a full value economy, where we expand the economic
and financial system to become a system for managing all areas of value creation and exchange. Blockchain will
enable us to account for and exchange all forms of value. This is a whole new dimension to the economy, a nonlinear
economy, wherein a whole new set of structures will emerge for the production and exchange of value. In this
respect, the new technologies enabled by the decentralized web and blockchain will be a key infrastructure, enabling
token systems that can capture the different kinds of value. The economy will be a network of many different sub
economies or value systems encoded in protocols with exchanges between them.

Increase connectivity at a greatly reduced cost allows us to expand our systems of organization beyond the confines
of closed organizations with high overhead costs, and instead create distributed markets that can integrate many
more smaller parts through low-cost distributed interactions. With the rise of the internet and Web 3.0, we are moving
from a world of homogeneous organizations in a coarse grained model with high transaction cost, to a world that is
fine-grained, real-time and very low cost per transaction. This has very significant implications for the dynamics of the
economic model that we have known since the rise of the capitalist market system some five hundred years ago.

The greater the connectivity, the greater the fluidity of exchange. The more effective and automated the systems for
coordination, the smaller more granular the resources we can afford to measure, coordinate and exchange. With the
blockchain, transactions will be cheap and fluid, and on top of this technology will be built platforms that automate the
exchange and allocation of resources. This will allow for ever smaller granules of value to be combined and delivered
as integrated solutions. Solutions at scale will no longer require homogeneous organizations to deliver them, but may
become the product of swarms of small modules being rapidly and fluidly aggregated to meet demand. For example,
the operating system of Windows in the 90s took the homogeneous organization of thousands of people bound within
one overall closed organization to build, but the average size of a team working on Linux is four people and the
average size of a team working on Wikipedia is one person.
Information Technology is increasingly shifting capabilities from formal organizations to informal networks that can
harness the small distributed resources of the many. In this process, we will see a shift from the traditional form of
active mono-dimension work to include not only more value types but also a more passive type of work. For example,
the data the one creates while driving along being captured by a platform that uses it to monitor traffic and provide
value to others, where one is performing a passive form of work and a multiplicity of value streams. The same will be
true for many activities that we currently do not consider work as the line between work and leisure will become ever
more blurred.

In the future of work, the ultimate resource that

companies will use more efficiently is the
h u m a n r e s o u r c e . L a b o r - i n t e n s i v e fi r m s
everywhere will need to reinvent their business
models, deploying smart technologies and
using labor more productively. One result is that
work will be unbundled. Just as disruption
unbundled music albums into songs, it will
unbundle jobs into tasks, with each task
performed in the most efficient manner
- EY, The Upside of Disruption
Work will not be a fixed monolithic activity that simply happens between fixed hours but instead will move to a more
freelance model, where it is defined in terms of value streams channeled and aggregated by platforms. As we come
to be able to track and utilize every small module of value, people will be able to monetize on an ever-larger array of
activities in their lives. Work and income will become more like a plurality of value streams they create and manage
via platforms, instead of just one value stream that is given to them by some formal organization and defined in terms
of space and time, such as the office and the nine-to-five job.

The new possibilities enabled by the distributed global platforms of the web make it possible to link people directly
into the global economy like never before, offering huge potential. Globalization brought many more people and
resources into the global economy but ultimately it was a very centralized model, based around corporations, large
urban centers, and factories, leading to huge inequalities in outcomes. This model created many bottlenecks that
resulted in limitations to how far out it could reach. The traditional industrial economy was extremely elitist when taken
on a global level as it created a divide between the "West and the Rest". The globalization of supply chains began to
change this, lifting millions out of poverty in China and other emerging markets. But to expand the opportunity to
participate in the global economy to all will require a different model. No longer branching out from the urban centers,
with online platforms and blockchain this new system of organization can go directly from the global to the individual,
and without the bottlenecks of the centralized organization it could potentially work for billions instead of millions of
people.

The World Bank estimates that only 30 percent of the world’s land rights are registered and recorded. In Africa, a
mere 10 percent of rural land is registered. According to the World Bank today, 2 billion adults remain without a bank
account. In Kenya, 80 percent of financial transactions are below 5 dollars and half below 1 dollar. These figures
illustrate how the mass of people's economic and financial exchanges are simply too low to be brought into the
traditional centralized formal model; enabling access for them requires distributed high-tech but low-cost solutions.
Already in Africa and other developing economies on the frontier markets, we see the infrastructure that is linking
them into the global economy is not so much based upon traditional centralized solutions. According to the World
Bank, in Sub-Saharan Africa, 12 percent of adults (64 million adults) have mobile money accounts (compared to just
2 percent worldwide); 45 percent of them have only a mobile money account. Here we see the infrastructure that is
 "This is globalization's
moment of truth, if
globalization wants to
succeed as a system, it
has to leave no orphans
behind"
- Hernando de Soto, Economist
linking them into the global economy of finance and exchange is bypassing the centralized model as people create
their first bank account with the mobile phone through cellular networks that bypass the traditional fixed line
infrastructure - with those phones often charged by solar cells on a distributed grid. This is a model that actually has
the potential to scale to the required level needed to create a stable and inclusive form of globalization.
A huge shift that is taking place today in the locus of value creation is the move of production from organizations to
individuals and networks. In the past, centralized organizations gave individuals value; organizations defined people's
value, whether this was government and money or one's value ascribed by one's place within the hierarchy of a
business. Work taking place within the household - rearing children or looking after the elderly - fell outside of the
economy because it was personal and not given value by some centralized organization. This will though shift in very
substantive ways. Instead of value being given to people by their role in some formal organization, they will start to
own their value. With the blockchain, the money is theirs only, not dependent upon some government to validate it. It
is ensured by open code, mathematics, and technology. Their data is theirs, not by default the property of some
platform. Their attention is theirs and they can sell it.
In a networked economy, production and exchange is not mediated by centralized organizations that validate and
evaluate the contribution of the mass of people. Instead, people can connect directly into market networks and sell
whatever it is they produce that is deemed of value to the network. This creates a massive shift in authority, control
and power within society as the existing organizations no longer have the capacity to define value within society and
economy. One example of this being Bitcoin which unlike government issued currencies - which are ultimately
dependent upon the government's centralized authority for their value - is dependent upon people's evaluation of it
and is ultimately supported by mathematics, cryptography, and code.

"We are moving from user generated content that you are familiar with, which is really the
cornerstone of social media. When you post a picture on instagram, when you write a few
lines on Facebook or twitter, that is called user generated content. In the future, we are going
to have user generated work, but this is work that we are going to get paid for by the
blockchain, by all of these cryptocurrencies that will come into existence" - William Mougayar Virtual
Capital Ventures
An interesting aspect for us to note in this respect is that the user-generated economy works to break down traditional
divides within the capitalist system, between owners of capital and workers. Capitalism is one particular type of
economic system that has been a key characteristic of our modern economic organization - since the Commercial
Revolution some five centuries ago - as it has defined production and consumption in modern society. Among other
factors, it involves private ownership of firms and resources and a system of wage labor through which individuals
compete for jobs within the context of basically market. In its nature, it creates positions of substantial power for
owners of capital, and generally little power for owners of labor - workers - creating a specific socioeconomic
dynamics surrounding this that was most clearly illustrated by Karl Marx.

However, the move into an information networked economy changes this core relationship in fundamental ways. The
token economy merges capital markets and money markets like never before. With tokens, the investment capital for
an enterprise is the same as the liquid capital used for operations; the tokens used for exchange are also the same
securities that claim ownership over the overall organization as investment capital also becomes working capital. In
addition to rewarding founders, these app-tokens allow participants in networks to actually own a piece of the
network. Of course, we have seen this before with such enterprises as cooperatives, but what is different about the
token economy is that it builds ownership by users into the network at the protocol level - which, in an information
economy, is essentially the fabric of the economy.

Tokens enable those who are creating the value through their work to also have ownership within the organization.
Consider how many networks the modern western internet user is a part of - Facebook, LinkedIn, Twitter, Uber, Etsy,
Airbnb, eBay, Tumblr - the list goes on. In each of these cases, the network’s value is created by the users, but the
value each individual user generates goes to the owners of the network. In this new blockchain-based model, that
value is actually given back to the users of the network, proportional to their contribution, thus merging ownership with
participation in new ways that break down the traditional divides between owners of capital and providers of work
labor.
Distributed platforms are networked markets based upon some underlying
resources that one side is delivering - such as file storage. The others who "We think of capitalism as
want to use that purchase the tokens to use the resources and that purchase
gives the token's value. Those same tokens that are used to finance the being locked in an ideological
system are used as exchange, thus capital equity and liquid equity are battle with socialism or even
merged. In the traditional utility based exchange of cash, people have no communism but we never
ownership in the system, they just try to make money and this can create
really saw that capitalism
divides between the owners and the users of the system. The token system
works to align the incentives of the individuals with the overall system, might be defeated by its own
because the value of the tokens they earn in exchange is also dependent child technology"
upon the value of the whole. When you are working for a token network, you - Eric Weinstein Economist
are both working for yourself and for the whole as the two become aligned,
unlike the traditional divide between capitalist and worker/consumer.
This is not to say the divides within the system disappear, they don't, they simply are transformed into a new form,
based on networks and knowledge instead of the ownership of physical resources. In his book Network Society, the
sociologist Manuel Castells identifies the new divides that form in a networked economy as between what he calls
self-programmable and generic labor. Self-programmable labor is equipped with competencies for lifelong learning,
the ability to retrain and to adapt to new conditions and challenges. By contrast, generic labor is both interchangeable
and disposable. In a sense, this is the divide between knowledge workers - that can create networks and models -
and information workers - that work for networks, between those who program the networks and those who operate
within the network.
As Manuel Castells notes, power in a networked economy and society moves to the programmers and regulators of
networks. In this world, power shifts from one's location within the hierarchies that managed the centralized social
and political organizations of the Industrial Age to technology and knowledge. It shifts to those who have access to
and know how to use technology but also those who have the knowledge to build the algorithms and organization of
networks. The shift of power to information networks and algorithms that is happening today is truly radical. Such a
radical shift in power from institutions and people to networks and automated algorithms is probably the most
profound transformation taking place in the organization of our society and economy.

"I think this is really exciting because right now most
work flows are basically within an organization, you
have these intra-organizational workflows and then
you have these really hard edges to kind of cross to
another organization, and with blockchain we are
going to kind of see this seamless workflow go from
end to end" - Joe Ventura AlphaPoint
 From Linear Organizations to Platform Ecosystems
The two major changes that take place in a networked information economy - that horizontal connections come to
dominate over vertical structures and that resources can be duplicated at zero-marginal-cost - means that there
comes to be more value accessible outside of closed organizations than inside of them, and the emphasis shifts from
ownership within organizations to access to resources in open ecosystems.

Networks strengthen the capacity to collaborate within whole ecosystems and duplication means that resources can
be created once and shared many times at very low-cost, greatly strengthening their common exchange and usage.
As a cause of this, the means of production and value shifts from that of the closed organization to ecosystems. The
emphasis shifts from ownership of products to access to services that deliver value. The key shift in business model
here is that of the move from organization selling one-off products to platforms delivering services. Platforms
represent the shift from the production of things to the creation of connections, in that platforms do not create "things"
through linear production processes. They instead organize through networks of connections.

Platforms harness the two important components of the networked economy, peer interaction and low-cost
duplication, and they do this by creating markets for people to connect peer-to-peer. But just as importantly, they
create in-house services to enable the user to create value - which they then retain some of. Platforms open up
markets for people to participate and provide the infrastructure that facilitates production and exchange.

A platform is not linear, it is a network of connections with producers coming in from one side and users connecting in
on the other side, with the platform providing the core services of reusable building blocks for members to use. And
out of this, we get the emergence of ecosystems that deliver value. Instead of focusing on internal processes, they
focus more on the management of external interactions. The success of the organization moves outside of the
organization to the ecosystem. Instead of creating a limited number of products within the organization, the platform
leverages the capacities of the network to create a massive amount of services and works to filter them.
One of the earliest and best examples of this was the smartphone. When they were first developed, the organization
tried to produce all the apps for them themselves, the result being a limited number of apps were shipped on the first
smartphones. When they became open to the developer community, we got millions of applications and this is
happening in a wide variety of different areas across enterprise environments today, and it's creating a tremendous
rise of value that is delivered in the marketplace.

Instead of the traditional organization that uses formal hierarchical structures of authority to direct the organization
towards specific ends, platforms instead have to manage the incentives of the actors towards the development of the
ecosystem. Unlike the traditional organization that has to create fix strategies and directly coordinate the
organization's members to a given end, platforms instead have to manage the way the network is interconnected and
the feedback loops that enable network effects and the development of the community.

A good early example of network development through positive feedback and the network effect is the e-mail service
Hotmail. Hotmail was one of the first companies to capitalize on network effects when the founders began to offer
web-based free email Hotmail accounts in 1996. Using HTML, a web-based service was created where a person
could access their email account from any web browser connected to the Internet. What was interesting about
Hotmail was the growth strategy they adopted to get new users to sign up. In six months, they had a million registered
users. When it was sold to Microsoft for $400 million in December of 1997, it boasted 8.5 million subscribers, and as
part of the MSN, it grew to 30 million by mid-1999. This was something very new at the time but since become almost
commonplace as the internet has matured and people have come to understand the creation of value through
network effects more comprehensively.

"So the fundamental change that is happening in business today is a change in the very flow
of business. In a world of pipes. we saw business move from a producer to a consumer in a
straight line. What we are seeing today increasingly in a world of platforms is a whole range of
flows between different participants and the business no longer controls the flow it just
enables the flow to happen between these different participants” - Sangeet Paul Choudary
Entrepreneur
The platform model is also about enabling networks of interaction based upon some common infrastructure. The first
key element to the platform model is connectivity and coordination between members, through which they can create
value. Shared infrastructure is the second key element to the design of platforms that makes them greatly more
powerful than the linear model. The platform model uses abstraction in its architecture. It is this abstraction that lets
them not only compete with other organizations but in fact take over whole industries or create entirely new ones.

Whereas the traditional model is one of closed organizations all creating proprietary offerings and then competing
with each other in the market - the result being many different organizations all creating similar solutions and
expending large amounts of resources on in-house solutions and marking strategies - platforms work by creating
shared services for participants within the platform ecosystem. This enables the users on that platform to be more
effective and efficient, reducing redundancies on the infrastructure level. Think of a platform like Youtube, it provides a
shared global IT infrastructure for its users, the kind that would have cost a traditional organization of just 20 years
ago many millions of dollars to develop. Once the members of the platform have this infrastructure, they can then
quickly build solutions on it efficiently, which in turn makes the whole ecosystem more valuable. The platform then
uses this, along with network effects, to take over whole industries composed of traditional organizations that are not
able to compete with such efficiencies.

Platforms were the major innovation of web 2.0, but they will go on to be a core part of the future internet, and indeed
the global economy. This being said, the platform enterprise of web 2.0 will morph and take new forms as they
become less centralized and more like proper networks and protocols with the development of the distributed internet.
Either way, the genie is out of the bottle at this stage and in the coming decades organizations of all kind will shift to
the platform model - or be taken over by them. this is a major part of the structural change taking place in economic
organization as we move into the networked economy.

"Many of today's leading digital organizations are famous
for their products and services but look a little closer and
you will see the most groundbreaking ones are based on
technology-enabled platforms. What is so good about this
model? Platforms bridge industries reaching entirely new
partners and industries. More than a new value chain, the
platform creates an entire ecosystem around itself. Cloud
services and APIs are the crucial first step giving you the
scale and data collection to break into the platform world.
Get prepared and establish your strategy as we are on a
major macro-economic shift, welcome to the platform
economy" - Accenture Tech vision 2016
 From Static to Evolutionary
Since the end of colonialism and the birth of many new nations around the world, the question of economic
development has been of major interest to economists and policy makers. Since that time, we have seen some
countries like Chad making little economic development, while others such as South Korea have grown rapidly to
become advanced economies. During this time, we have also been through many different theories surrounding how
economies grow and how best to manage their development. Today, with the integration of our global economy, this
question of why some countries develop rapidly while others remain stagnant has moved to the forefront and it
remains very much an open debate within economics.

Traditionally, in thinking about economic development, we have focused very much on planned outcomes. Within the
centrally regulated paradigm to economic development, a model of the system and its future environment is created.
We define a future desired state and directly coordinate the components within the system towards achieving this
end, typically through some direct form of incentive system. The aim is to maximize throughput. Within a macro
economy, this gross throughput is captured by the metric of gross domestic product, which is seen to be the primary
metric to an economy’s state of development and the key parameter that we are trying to optimize for.

This paradigm of economic development found its most clear theoretical expression in the so-called linear stages of
growth model, which posits that there are a series of five consecutive stages of development which all countries must
go through during the process of economic development, and the primary objective of developing nations was to
control and guide the nation through these successive stages. The linear stages to growth approach can be seen as
paradigmatic of the Industrial Age model of stable predictable management, but it ultimately became replaced by the
neoliberal model later in the 20th century.

With economic globalization, this model changed somewhat. As part of the neoliberal paradigm, the economy was not
so much seen as something that needed to be planned, operated by the state and fully regulated to meet society's
needs. But instead, the state was seen as a means to provide the basic legal and regulatory framework - plus other
basic services - required for the economy to be opened up to global supply chains.
 Increasingly, economies came to be seen as platforms for the global economy, as exemplified by the trade free zones
of major urban centers in developing nations such as iconic cities like Shenzhen, Shanghai, Dubai etc. It was
identified that the way to grow an economy was to connect into global supply chains and provide the physical
resources, labor or services that were demanded by the global economy and thus receive the resources within those
networks in order to grow one's economy.

The key insight of the classic economic theory of Adam Smith and extended by Hayek and others is that the market
system, through distributed peer-to-peer interaction, creates a form of complex spontaneous order, through
information exchange and incentive systems. Through globalization, the global economy has become too complex for
any centralized organization to manage and, in complex environments, the process of development shifts from fixed
plans to enabling open platforms for evolution.

The market system becomes the core platform for enabling the process of evolution which, in turn, is the vehicle
through which the socioeconomic system aggregates information and generates responses to the given context.
However, it is critical to note in this respect that the system will only be able to respond to - and thus manage -

"The future of globalisation over the coming ten to fifteen

years could be more productive and more disruptive than
we expect. Rapidly emerging and expanding technologies
are creating the infrastructure for a new hyper-digital, hyper
globalized economy and society. These changes could bring
unprecedented improvements in human well-being,
overcoming scarcity for billions and bringing ingenuity and
innovation to overcome global problems. However, these
changes could also greatly accelerate inequality, instability,
polarization and mistrust, leading to further political
backlash and conflict" - OECD Foresight for global digital disruptions
whatever information and values are incorporated into the platform. The problem with the market system as we have
known it is that it only incorporates a limited set of values and thus a specific set of information; the result has been
outcomes that are unsustainable due to massive arbitrage and externalities.

The globalization of the past was essentially a process of exporting the industrial model - that was developed in
Europe and the US - to other parts of the world and thus develop a global economy. But this model is elitist in nature
and far too inefficient to support a desirable material standard of living for the seven-plus billion people that are on the
planet. The critical change that will take place as peer-interaction proliferates - and centralized systems are rendered
less capable of directly managing the economy - is that enabling successful economic development shifts from,
formal organizations creating fixed plans to the design of open platforms. In this respect, the emphasis shifts from
centralization to subsidiarization. With the rise of distributed technology, it is possible to change the classical model of
development - through centralizing the means of production, bringing people into cities to work in factories, the
development of large agricultural systems etc - and instead shift to a model that works to push the means of
production out to the edges of the network, where everyone has access to them.

Once distributed technologies are available at low cost and people can access global platforms for exchange, the
model for development switches from planning and centralization to ensuring people have the means of production
and access to these exchanges. We switch from stipulating specific ends to designing protocols that will enable
people to interact in a fashion that is most likely to lead to desirable emergent outcomes.

An information economy stands in contrast to the industrial economy in that it is not a mass society, it is a
dematerialized economy. The shift is from a form of development through the processing of more physical resources
to development through the optimization of the organization within the system through which those resources are
used. A shift in the focus of development from mass production to innovation, a shift in development model from
centralization and the mass production of physical resources to the development of systems through improvement in
their internal design as innovation moves to the forefront of economic development.
"This is the first time in history when the most
advanced technologies have also gone to the
poorest countries, so in Africa many countries have
been able to skip the whole fixed telephone lines and
go straight to the mobile phone, the same might be
true of renewables" - Lord Anthony Giddens
As the internet becomes the organizational platform for the global economy, the process of developing economies
changes from the traditional linear model of large organizations and production processes and becomes based more
directly on knowledge and information. We create new ideas that are translated into models, that become code, that
reconfigure protocols and networks, which allow for the more efficient organization of people and processes through
automated systems. Instead of requiring lots of resources and people, processes, and regulation, development
switches to the creation of ideas that are translated into information and, if they are needed by the network, they
become adopted and resources start to flow through them. Research, develop, deploy, run and iterate in fast cycles.
Innovation is switching to the internet; from hardware to software which can be written and rewritten much faster.
When this system is open to many worldwide and education becomes more widespread, the pace of innovation and
technological change increases rapidly.

As the pace of change increases, those who are not able to innovate get left behind faster. In a world of fast pace
change, when everything can be copied and systems become more open, the half-life of creating an organization
based upon a value stream off some fixed technology or service is greatly reduced and innovation becomes a
requisite for continued survival.

Most work activities today consist of repeatable processes and this is precisely their vulnerability to automation as
automation is all about iteration on the same or similar process. The power of computation is in its capacity to iterate
on basic information processes. Increasingly, once we understand the basic structure to the work process of a given
task - and through advances in robotics we are able to connect the physical activity up to computation - then
computers can perform any given routine process more effectively than a person. According to the World Economic
Forum, between 1997 and 2007, 86% of US manufacturing job losses were due to technology and not trade. Making
the transition successfully into an information networked economy means shifting from the mass economy to the
innovation economy, which would be a very different looking economy.

As illustrated by the Economic Complexity Index, the wealth of nations comes largely from the complexity of their
economy. That is to say, the differentiated specialized knowledge that its members have and the effectiveness of the
systems through which they can aggregate and coordinate those capabilities to the desired ends.

same, each mechanic to be the same and the
economic and social arrangements were set up for
this homogeneity through standardization, e.g.
mass education, mass media, mass consumption
etc.
With mass automation, this will no longer be the
case as we can increasingly automate generic
activities. The global networked economy exists on
This is an explicit recognition of the diversity of the
individual elements in the system and the protocols
for coordination as central factors in economic
development. The industrial economy represented a
certain level of socioeconomic complexity; a certain
level of differentiation between the parts and the
scale of the systems through which we coordinated
them, i.e. the national economy. In the industrial
economy, we needed a diversity of organizations but
we largely did not need diversity on the individual
l e v e l . We n e e d e d m e c h a n i c s , fi s h e r m e n ,
accountants, teachers etc. Within that, we largely
wanted each worker on the production line to be the
"Most people don't see they are capable of doing
these one-off acts of inspiration, that will
probably always be fairly highly rewarded, they
see themselves as needing some repetitive
behavior on which they can build their families,
their hopes, and dreams, and in general that may
be coming to a close. Even if that has always
been false in the past, I think there is excellent
reason to believe the era may have changed”
- Eric Weinstein Mathematician and Economist
a new level of complexity. That means the differentiation goes down to an even deeper level and the system of
coordination goes up a level from the nation and enterprise to global systems. Differentiation goes down to the level
of the individual - to maintain relevance, it is required that each individual is doing something that is non-standardized
and differentiated, but also capable of interoperating and collaborating within global networks.

The key difference that comes about in this shift into an innovation economy is the displacement of centralized
organizations making fixed plans for development. Instead, we get the move towards the formation of open platforms,
enabling evolution to create new solutions in response to changing conditions. The shift from planned order to the
spontaneous order created by distributed networks.

Section 4 | Solutions
 Networked Organizations
What we have tried to illustrate so far in this paper is that the global economy is evolving into a more complex form of
organization - meaning more differentiated parts on the micro level and greater interconnectivity and interdependence
between them on the macro level through globalization. The complexity of this environment goes beyond the
capacities of the systems of organization that we developed during the industrial era. As such, the key shift that needs
to come about in responding to the current economic challenges of our time is the move from a dependency on a
limited number of people within centralized hierarchical organization, towards leveraging whole systems of
organization through networks that engage the resources of the many instead of the few, through peer-to-peer
production and network exchange.

As noted, the decentralized web stack will be the key technology enabling this transition into a true form of networked
economy going forward, and a new structure to how economies are organized. The core idea of decentralization is
that the operation of a service is not trusted to any single centralized organization but instead the provision of basic
economic services become delivered through peer-to-peer networked markets running on decentralized web
technology.

"The future is coming and it

is coming faster than we
think. How do we take
advantage of blockchain,
build upon trust economics
and reimagine the world
around us?”
- Bill Briggs, Deloitte Consulting
Instead of many centralized organizations having ownership of data, resources, and control over service and product
delivery, creating a siloed economy, with distributed ledger ownership of one's data, work, value creation, money and
other assets can be relocated with the individual and quickly made available for use across the entire global network
of the internet, for the realization of some common process. This open trusted database greatly facilitates people
collaborating in an unstructured fashion in real-time through dynamic networks.

The decentralized web is essentially just a set of protocols and databases. Those protocols will remove the
organization in the center and create automatic systems for people to interact, create or exchange value directly peer-
to-peer, through the underlying technology in a seamless fashion. With the advent of this technology, there is a
growing recognition that service organizations essentially just provide information processes, procedures, trust, and
computing hardware. All of which can now be done via automated protocols that connect end user resources to
provide the service within an almost fully user-generated system.

To date, we have largely placed traditional systems of economic organization on top of new technology. But in this
next stage of development, information and economics merge, as for the first time, with this new technology, it is
possible to directly monetize on the protocol layer instead of building two different levels - one for the business model
and one for the technology - the two essentially become one. The result is that there are no companies in the
traditional sense, just protocols. Organizations merge with and are converted into protocols. By reducing the cost of
transaction and coordination, these decentralized platforms turn traditional organizations into projects or markets that
are automated through smart contracts and protocols.

Value generation shifts from the means of production within organizations to how things are interconnected and
organized. And it becomes increasingly recognized that this can be automated into protocols and algorithms that
manage network rules. The value today is increasingly in creating the structure for markets that harness the
incentives of users to interact, self-organize, coordinate, create and exchange value within the ecosystem. The
value grows with membership, which in turn sucks in more members compounding the results, in a model that favors
the early.
"One of the interesting properties here is the ability to create markets
where there wasn't a market before… what [blockchain] application
platforms can do is to suddenly cut out this huge middleman with a
protocol and that is a massive cost-saving for the entire network... you
can turn this into a protocol that will optimize the entire process much
faster than any centralized company can do, because it turns it into a
market. The moment you can take a very complicated process and
translate it into a market where a whole bunch of different actors can vie
for opportunities and just beat each other, you have this amazing
optimization power, where it will just fit the function much better than a
centralized entity could have”- Juan Benet Blockstack
 Token Economy
The outcome of the information revolution, big data, internet of things, and advanced analytics is that we will be able
to sense and quantify our world like never before. This will give us the capacity to quantify and begin to account for all
forms of value. This is something that was previously not possible as we simply did not have the information. As the
data starts to flow in, as our capacity to process the information in real-time matures through advanced analytics, and
just as importantly, as our scientific understanding of ecosystems and social systems matures, we will increasingly
have the capacity to quantify the value of these things in a more comprehensive fashion and begin to manage them
through peer token economies, instead of centralized organizations.

With token systems, we are using economic markets or networks to manage, preserve or increase the value of
something. This may be the social capital in a community or the integrity of an ecosystem, the infrastructure within a
city, or peoples attention - there are already decentralized organizations that will pay tokens to members for their
attention. This is because tokens have the key property of being fungible, where fungible means without an individual
specimen being stipulated and thus able to replace or be replaced by another identical item; mutually
interchangeable. Tokens are just symbolic measures of some value, they can be any form of value. In this way,
tokens allow us to defined value of any form and create an economy around that.

With token systems, we can create customized programmable currencies. With tokens, our representation of value no
longer has to be a single homogeneous thing, that is tied to the centralized authority of the state. Tokens can be
issued for any form of value and they can be programmed to have terms and conditions. Programmable money is
code that is attached to a token - such as Bitcoin - which enables one to specify certain rules for that token of value
and have those rules executed when it is exchanged to enable certain constraints or possibilities in its use. One can
specify that a certain token is only spendable under certain terms or specify how it can be converted. This is an
important technology in enabling us to move towards capturing, quantifying and creating an economy for the
multiplicity of value systems that our economy needs to manage today. It enables us to bring these value systems
into economic management, but without reducing them to mere utility. By programming constraints, we can create
tokens that capture the inherent value, not just utility - and this is a key element required in developing a sustainable
economy.
These tokens can even be programmed in such a way that it will automatically return to the provider if the receiver
does not use it after a certain amount of time. In this way, the provider can ensure that allowances are not hoarded or
used for certain ends, which removes the need for regulation as compliance is built into the system. A healthcare
allowance in dollars or euros could be programmed on the blockchain so that it can only be used to pay for healthcare
at certified parties. In this case, whether someone actually follows the rules is no longer verified in the bureaucratic
process afterward; you simply program these rules into the money. One can program budgets for salaries, machinery,
materials, and maintenance so that the respective money is specified and cannot be spent on other things.
Automating these measures leads to a considerable decrease in bureaucracy, which saves accountants, controllers,
and the organization, in general, a very large amount of time.

To create a token economy it is essential to understand what is of value in that system and what activity contributes
to, or depletes from, that stock of value. For example, a token system could be used to manage the scarce water
supply within a community. One would then identify that using good water to wash cars or water lawns is depleting
the value and thus costs tokens. Inversely, the implementation of new more efficient taps that conserve on water
usage would add to the value of the system and thus members may receive tokens for using them. Water tokens can
then be traded and anyone who wants to take from the stock of value has to pay for it, which incentivizes people to
create more of the value stock and thus works to potentially manage it in a sustainable fashion. The value of the
token has to be directly tied to the underlying resources and network so that, as the network value grows, the token
value also grows. This incentivizes those who hold the token to grow the network.

Money is a technology, a system that enables us to trust. It enables us to identify what we collectively value and
exchange it in a frictionless fashion. Money is an agreement about what we value. As values change, eventually the
technology of money will catch up and this is what is happening with token systems. The token system is already in
the process of powering a whole new set of business models and will over time bring liquidity to a whole new
economy outside of the conventional model.
 What Is a Token?

Unit Of Exchange Investment Participation

A token is a unit of value
exchange within a given
token economy that can be
used to make purchases
A token is an investment in
a given community and its
services, as the value of the
community expands so does
the value of the token
Ownership of a token implies a
right to participation in the
network, decision making,
governance or even ownership
"In a world with many blockchains and hundreds of tradable
tokens built on top of them, entire industries are automated
through software, venture capital and stock markets are
circumvented, entrepreneurship is streamlined and networks
gain sovereignty through their own digital currency. This is the
next phase of the internet" - Olaf Carlson-Wee TechCrunch
 Distributed Platforms
With the blockchain, these new organizations that are getting invested in are not really companies in the traditional
sense, they are much more like an open-source project. They are typically open-source code and what they do is
create technology that enables a community to define and create value for each other. This is quite different from our
traditional conception of a business, but it is what is needed at this stage in economic development, when the
economy no longer needs to go on creating more of the traditional "stuff" but, in fact, has to diversify into new value
streams in response to society's changing value demands. This technology of coordination does not just grow value
internal to some organization but also grows the industry ecosystem, giving it the capacity to coordinate and
potentially tackle larger problems that were not approachable using the closed organizational model.

Part of the major shift that is coming about in organization with the rise of networks is the shift from an adversarial
decision-making process to consensus decision-making. Networks have traditionally been limited in their capacity for
collective action relative to the hierarchy, which is able to make decisive decisions based upon a clear chain of
command and a limited number of decision makers. The hierarchy has traditionally been the dominant mode through
which decisions were made and implemented because it was difficult to aggregate and process the opinions of a
large number of members in real time. This has now changed though. With a reduction in transaction cost and
increase in computation, we can now setup networks through which members can interact and come to consensus on
an issue, almost in real-time.

This is a game changer as it means that we can shift the decision-making process from a limited number of members
competing to have their ideas implemented in an adversarial model through a chain of command, towards a
distributed model where a great many people's opinions can be collected and process to find where the greatest
consensus is before implementing that through automated systems, i.e. smart contracts. This is exemplified by the
blockchain systems, where trust and authentication are realized through the consensus among many people and
computers, instead of some centralized organization. Unlike the hierarchy, where direction and commands flow in one
direction, with networks there is a reciprocal feedback between the nodes as information comes to flow in all
directions. Whereas hierarchies are based on commands that are executed through formal structures, networks do
not have such structures and are based more on consensus and the interplay between many different participants.
A key part of the shift from the centralized model to the distributed model will be the need for distributed rapid and
efficient systems for consensus building. As the relationship changes from command within formal structure to
collaboration within informal structure, the emphasis shifts to the design of incentive structures and feedback
mechanisms for aligning the interests of very many autonomous members towards a consensus, instead of
agreements being imposed through a chain of authority.

The emphasis moves to creating conditions and protocols that best facilitate the process of self-organization towards
consensus, which requires both an understanding of the incentives motivating the actors and the way they are
interconnected and interdependent. A token economy is a peer system of contingency management, based on the
systematic reinforcement of target behavior. A token economy is based on the principles of operant conditioning and
behavioral economics. The shift from formal organizations to the individual means a shift of responsibility on to the
individual as they are no longer protected by the organizational structure. Instead of one's value being dependent
upon one's place within a hierarchy, people's value become measured directly by peers through market networks.
The result is the emerging model of the micro-entrepreneur, who creates and manages their own value streams within
distributed networks.
Using this new model, entrepreneurs create blockchain-based tokens that represent ownership in the network they
are building and also act as the unit of exchange within their network. For an investor, there are no shares of a
company available, only the blockchain-based token. As the blockchain space expands, disproportionate returns will
go to holders of the actual tokens, not traditional venture investors betting on shares of a company.

However, these tokens are not like stock certificates, which represent ownership but have no real use. App-tokens are
actually used in the network to participate. In a file-storage market for example, they would be used to prove file
ownership and buy and sell storage space. The founder of the network keeps roughly 10 percent of the tokens for
themselves and their founding team, and if their network becomes popular, the demand for tokens rises, and because
the supply of the token is fixed, the price increases. This means that founders can monetize their networks directly by
simply holding their tokens and making the network useful. If they need liquidity to continue funding the project, they
can simply sell the tokens on the open market.
"The Decentralized Web has massive
implications for the whole Internet and can
only be understood one example at a time.
Monopolies will be replaced by peer-to-peer
commerce, walled gardens will be replaced
with self-sovereign data ownership, [and]
brands that abuse trust will have to
compete with open communication”
- Dan Finlay, Consensys Systems
Kik is one of the biggest social messaging platforms in the world with over
300 million registered users in 2016. Kik is now integrating the messaging
platform with the blockchain to create a new token system called "kin" that
will create a token economy on the platform for developers and end users. If
you're a developer and you bring your digital service into this ecosystem, the
percentage of transaction volume that your digital service creates relative to
the overall ecosystem is the percentage of the daily reward you get, similar
to a profit sharing or co-op type model. It economically incentivizes
everybody to work together and it creates a network effect where the more
developers that come into the ecosystem, the more transactions they create.
The more transactions they create, the more valuable the Kin token
becomes overall, and the more valuable the daily reward becomes, again
incentivizing more developers to join.
 Services Platforms
A networked information economy is a services economy. It is about streams of value instead of discrete products.
The move towards a services economy is one of the key components towards achieving a more sustainable
economic model as it works to dematerialized our existing product-based economic paradigm and move it towards
focusing on value and outcomes.

The as-a-service model enables the much-needed transformation in economies towards becoming outcome
economies. An outcome economy is an economy contingent on the marketing, pricing, and selling of goods and
services based on the results or "outcomes" they produce for customers, rather than on an item or service's face
value. With the emergence of the outcome economy, companies are beginning to shift from selling specific products
to marketing and selling the end results that they produce. For example, instead of selling office carpets or building
lifts, they sell the service of the carpet or the service of the lift, retaining ownership and maintenance of the physical
product while charging only for the service that it delivers. That shift has companies focusing more intently on
delivering what their clients and customers actually want or need to achieve. With the token system, revenue gets tied
to outcome. Through investment, this can work as an important dynamic in enabling the outcomes economy.

A service, in its traditional meaning, is an act of helping or doing work for someone. A service system is a
configuration of technology and people designed to deliver functionality to the end user. The term servicization refers
to the economic transition from an economy or business model based on the production and consumption of things to
one that is based on the function those goods deliver. In a services economy, the focus is not on buying and owning
goods but instead on buying access to streams of services that are required to achieve a certain quality of life.

When we couple this with the networking and organization capabilities of information technology, a whole new form of
economic and business model can emerge, one that is based around connecting and organizing products into
systems that deliver functionality, without the demand for anything new, except coordination. These information based
services build new value propositions by simply intelligently connecting things and unlocking the resources that were
locked up by a product based ownership paradigm.
 "This is the power of integrating software,
We currently have many closed institutions that infrastructure and business processes on
essentially run our economies, providing the services demand, providing companies with plug-in,
that people depend upon. Each of these organizations
are largely recreating the wheel for each service with modular, scalable and consumption-based
their own internal systems, that people then have to fit services. It enables business services and
into. The result is a highly fractured service for the end operations to become more intelligent, agile
user, with different large organizations having control of and robust, while supporting innovation
the individual's data and service while these different that disrupts existing business processes"
solutions do not interact with each other efficiently. - Forbes Magazine
Moreover, they create security issues because of single
points of failure. This model greatly increases
transaction cost. For example, with digitization, money
may now move at the speed of light through fiber optic
cables but in reality it only moves at the speed of banks,
having to go through all sorts of procedures as it crosses
between many different closed organizations each of
which has to authenticate it with many different
databases having to be updated; a very inefficient
system relative to what the underlying technology now
enables. Decentralized systems are a very effective way
of breaking down the silos as the user, data and
proprietary resources live in an open transparent and
collectively owned database.
Servicization unleashes value by switching existing products and components that are currently bound up by
ownership and lack of interoperability within monolithic organizations and converts them into services that can be
made available for anyone to plug into their system for use and reuse. In this way, we get a shift from people paying
for discrete services to a subscription model. Businesses and individuals pay only for the value that is delivered and
no longer pay based upon the cost of the medium through which it is delivered, i.e. the materials cost.

Servicization opens resources up to make them available for use via network platforms. People can then build new
services out of these modular components using a service-oriented architecture. Instead of building everything from
scratch, each time they simply plug into the services that are made available, building networks that can aggregate
those disparate services on demand to create some new work process or deliver some integrated service for the end
user. Servicization enables a much more efficient use of resources through reducing the redundancies created by
closed organizations. It works to dematerialize the economy and to build powerful ecosystems that are greater than
the sum of their parts, a key component that is currently missing in traditional market systems, which in turn results in
huge inefficiencies through recreating the same products and services many times over.

The primary organizational shift that takes place here is the move from the monolithic organizational structure, to a
service-oriented architecture. With the pervasive proliferation of networks, this same model can be used all the way
from the individual and small organization up to the global level and indeed this is precisely what platforms do in that
they provide the protocols. Enabling this redesign simply requires that people and organizations open up their
available resources for access through networks. Examples of this being people listing their spare rooms on an
accommodation sharing site or their cars on a car sharing service. We also see this with whole organizations, as with
Amazon's CEO famously directing everyone in the organization to make all their solutions available through APIs to
everyone else in the organization, and many for reuse externally.

"The amazing thing to me about the blockchain of the
cryptocurrencies, it's not just a new way to monetize a
community, but it's a new way to align a large group of people to
all come together and work together to build a better service for
consumers, one that's not just open where consumers can
freely move between all these different digital services but also
one where developers make money" - William Mougayar, CEO Kik
 Innovation Platforms
The move into an information and knowledge economy that fuels fast-paced technological change means that
organizations need to put innovation at the core of their enterprise. In the traditional model, innovation is something
that is confined to a small section of the enterprise, while the majority of organizational structure is built around
routinized and standardized processes for producing products. Most of the enterprise is designed to capitalize on
preexisting ideas and solutions, new ideas are implemented slowly as they flow out of the R&D department into
products and out to customers. As the authors of a recent article in McKinsey Quarterly note "The reported failure rate
of large-scale change programs has hovered around 70 percent over many years… Our most fundamental lesson
from the past half-dozen years is that average companies rarely have the combination of skills, mind-sets, and
ongoing commitment needed to pull off a large-scale transformation."

Change is slow in the traditional enterprise because they are not designed for it. Adapting to the new reality of the
innovation economy means structural changes; to take change and innovation from obscurity to the center of the
organization and building the enterprise around it, as a means for executing on new ideas and solutions. In the
classical linear business model, the innovation that a company brought its customers essentially came through its
own supply chain. In the world of platforms, what you see is that innovation comes from giant ecosystems of
sometimes tens of thousands or hundreds of thousands of individuals or companies. When the pace of change
speeds up, the successful ones are the innovators and adaptors. The linear business can not compete with platforms
that enable whole ecosystems, bringing the best, most and fastest innovations.

“[Innovation is] the process of technical, social and

institutional change that results from the interaction
among multi-layered sources of knowledge and its
transformation into new things, products or practices,
applied in a specific institutional and cultural context”
- Gottret, 2006
In this respect, one might ask how is it that cities lasted centuries and thousands of years outliving empires, nations,
and corporations? Why is it believed that cities become more effective as they scale up while businesses do the
reverse? The answer is that cities are open systems, while these other organizations are closed and major new
innovations happen in open systems. Central to enabling innovation is making the base resource out of which
innovation can work on a common infrastructure so that permissionless open innovation can take place. The higher
the barriers to participation in the process of innovation, the fewer who can participate, the less diversity and solutions
that will be created. Increasing innovation means reducing the barriers to entry. This can be done by creating
platforms that provide the common infrastructure and common tools for people to interact and experiment.

Innovation platforms are ways to bring together different stakeholders to identify solutions to common problems or to
achieve common goals. They ensure that different interests are taken into account, and various relevant groups
contribute to finding solutions. Innovation platforms thrive on the diversity of the participants, but also require a shared
infrastructure of resources and incentives for collaboration as individuals come together to generate diffuse and adopt
new knowledge. Innovation platforms should be designed to enable the full process of developing new ideas, their
implementation, and end usage, thus looking at the process in a holistic fashion.

An information networked economy reduces the cost of participation and thus reduces the dependency on centralized
authorities and large concentrations of resources, this makes possible distributed permissionless innovation. Indeed,
we can begin to see how the internet is already becoming a global platform for open innovation. In its openness and
ease of access to billions of people, the internet has also become the locus of innovation today, where solutions can
be created and then duplicated and adapted to local conditions around the world. The question then shifts to how can
an organization connect into and participate in these networks of ideas to create innovation in the same way that IBM
has built much of its business on the open source-project of Linux, enabling it to tap into a global network of people
collaborating and innovating in the development of the underlying technology.

"What the internet, what technology has basically done
is multiplied the possibility of solving problems by
allowing us to access every single person on the planet"
- Jack Dan
In a VUCA world of fast pace change, the emphasis shifts
from pushing out predefined solutions to pulling
capabilities together just in time to meet changing
demands. This ties in with the service dematerialized
model to the enterprise, as to achieve this event-driven
architecture to the organization requires the move to a
service-oriented paradigm where the enterprise, or even
whole economy, is not defined in terms of its components
but instead the network through which it can create the
required responses - in aggregating resources that may
well lay outside the enterprise. It is the inbuilt structure to
platforms that enable them to be qualitatively agiler than
the linear enterprise defined in terms of its component
departments, fix roles and products. Survival is the
primary metric of success in a VUCA world and to achieve that it requires a step change in the agility of the
enterprise, which in turn comes from shifting to the networked services oriented model of organization design.

Achieving the agility required to thrive in the VUCA world will mean shifting from the asset-based model to the on-
demand network model, where individuals and organizations are not defined by their fixed assets but instead by the
network of connections through which they can aggregate those resources in response to current needs.

Navigating major processes of change happens through evolution; placing open innovation platforms that enable the
process of evolution to take place at the center of the organization and thus making the organization capable of
adapting without dependency on centralized organization and fix future projects. Token prediction markets are one
such example of this. A key part of the process of evolution is feedback, exposing viable solutions to their operating
environment and the full process through which feedback from the environment is received by the organization and
processed into changes. Effective change happens by aligning the incentives of the organization with the information
"So it is a complete reversal of the
command and control economy to one received through feedback loops. Feedback is a
primary mechanism through which selection is
that says no, it is just the opposite. performed via only peer interaction.
Instead of pushing things into action,
how do you pull things naturally into To enable evolution, the system has to balance open
participation - in order to create a variety of new
action and make interesting things solutions - with the development of mechanisms for
happen almost seamlessly by effective selection and curation of possibilities.
leveraging the natural propensity of Managing quality through curation and filtering to
things around you" ensure that only the relevant solutions rise to the top.
When innovation is permissionless and accessible to
- John Seely Brown, Deloitte Center for the Edge
all, the emphasis shifts from scarcity of ideas to
abundance of ideas and a major new consideration is
that of filtering and selection. Platforms have to create
effective systems for filtering so as to find the best
solution given the context. Again, this can not be done effectively given centralized systems. It needs to happen
through distributed feedback mechanisms. Social networking is one such good example. Content that is put online is
viewed by members. If they like it, then they may share it in their social network, which works to make it more
prominent while other content does not get shared. In such a way, a distributed set of people have performed
selection and filtering for other people so that one only sees what many others have chosen to share.

Conclusion
With the move into a global networked economy, our systems of organization are going through a major structural
transformation that will take many decades before we find ourselves within a new coherent paradigm and common
set of institutional structures; a new level of socioeconomic organization on a new level of complexity which
represents a higher level of global integration but also greater individual differentiation.

In this process, we are changing both the structure of economic organization, but also changing the very resource
that the economy processes and what people value. We are changing our very conception of value and formulating a
new architecture to how we produce and exchange that value. After many centuries of economic value being
formalized in a restrictive utility based model, we are now redefining value in an expanded form. This is an inherently
complex process that will take us many decades to work through before we come to some systematic and coherent
framework for defining all forms of value and integrating them onto a single exchangeable platform, i.e. the internet.

Likewise, the other major factor that we have looked at in this paper - the development of direct inter-organizational
and inter-individual peer networks as the primary modality for economic organization - will be an ongoing process
driving continuous disruption for decades to come, as we come to better mine the analytical computational
capabilities of the microprocessor for dynamic automated coordination and the power of hyperconnectivity.

The new possibilities that will be enabled by the next generation Web 3.0 stack - that we have focused on in this
paper - is just one more iteration in this broader process that will take us a step farther away from the industrial model
and a step closer to a networked economy. It will be another major learning process, about what is now possible,
about the new possibilities of organizing economy and society. Just like with Web 1.0 and with the rise of the platform
economy, people's hopes and aspirations for a fully distributed world will likely be lost along the way, as new ways to
centralize and control resources form, as new inequalities and social fractures are revealed in the process of scaling
the technology. However, at the same time it will create new ways for people to live and work and reveal new viable
possibilities for global collaboration.
A Complexity Labs Publication
Curated by Joss Colchester
info@complexitylabs.io
 Reference Notes

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The Atlas of Economic Complexity

WEF, The Global Risks Report 2017

Globalization
Saskia Sassen, Consequences of Globalization

George Monbiot, on Neoliberalism

Brooking Institute, The unprecedented expansion of the global middle class

Digital Globalization A New Era of Global

Gallup Global Property Rights Index

World Bank, Measuring Financial Inclusion around the World

 Financialization
How to Change the Post-Crash Economy

Financialization, Globalization & Management of Skilled Employees

Harvard Business Review, Profits Without Prosperity

William Lazonick, The Financialization of the U.S. Corporation

Basak Kus: Financialization, Credit, and Income Inequality

Decentralized Web
Tech Crunch, The future is a decentralized internet

Re-wiring the internet for decentralization

Pierre Entremont, Token Economy 101

 Platforms
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McKinsey Quarterly, Transformation with a capital T