Human society is now rapidly evolving from a services-based economy to a network and intelligence-based economy.
But what does that mean, and what can we expect from the future? The following broad historical view could be helpful in putting current changes into context.
The hunter-gatherer stage of human evolution kicked off as early as 2.5 million years ago with early species such as Homo habilis (when tool use and foraging first emerged). In terms of modern-day humans, we could say that the start was with Homo sapiens around 300,000 years ago. The default mode of production was the use of simple tools to hunt and trap various animals and dig up tubers, crack open hard-shelled fruits etc.
This was the default mode of human existence until 12,000 years ago, when a big technological leap occurred: humans domesticated wheat and other plants. As an interesting side note, looking at Earth from space, an alien may argue it was actually wheat that domesticated humans – if you find this topic interesting a good book to read is Oceans of Grain.
The move to farming was a big leap indeed. As a result, human populations across the world increased from an estimate of 1 – 10 million to about 150 – 300 million by 1 CE. The farming revolution also allowed for excess food production that could now employ people not involved in the production of sustenance and food gathering. Thus armies, kings and queens, priests, and empires entered the rapidly growing world. In many ways, we can say that this was the beginning of history. Think the Mayans, Ancient Greece, and the Roman Empire.
The farming boom lasted about 11,000 years until in around 1760 CE the industrial revolution kicked off in Britain. It started with mechanization (think spinning jenny, the steam engine, etc.) and was fuelled by coal and urbanization. Human population once again turbo charged, going from 770 million globally in 1760 to 2.5 billion in 1950.
The industrial age lasted even shorter, in total less than two hundred years until the mid-20th century when the services-based economy and the digital age was ushered in. This was characterized by the first computers, the growth in financial markets. There were big population and employment shifts. Just as workers had moved out of farms and into factories in the industrial age, those workers now moved into offices in the services age. Population also ballooned, to 8 billion in 2022.
And what were the factors of production in each of these ages? For hunter-gatherers it was wild resources and human effort with no capital beyond simple tools to speak of. Entrepreneurship just meant taking risk to survive in the literal jungle.
As we moved into farming, wild resources were replaced with cultivated fields, a labour class of farmers and herders emerged, complemented with specialized classes of priests, soldiers and administrators. Capital tools got an upgrade, animals were domesticated. Entrepreneurship started emerging with landlords, traders, and innovations like crop rotation.
In the industrial age, labour continued to specialize even further, with concentrated factories urban centres started growing, and as heavy investment such as factories and infrastructure were needed, capital entered the stage in a big way as a factor of production. It is no surprise that Das Kapital was written during this transformative age. Hand in hand with capital, entrepreneurship also evolved, risk was scaling and robber barons such as Rockefeller, Watt and J.P. Morgan entered history.
In the services age, knowledge workers that used their brains instead of muscles emerged. Capital shifted to include more abstract things such as brands and patents. We can also think of this as the knowledge economy, and human labour was still a limiting factor, but more because of their knowledge and reasoning capacity, not their arms and legs.
We have now entered the network and intelligence age, and the factors of production, as well as the limiting factors on economic growth are once again shifting. On the labour front, humans that used to be knowledge workers in offices are now rapidly moving out, being replaced by computers that can reason faster, more consistently and more accurately.
As a result, on the capital front, the main constraint of growth is shifting from humans to computational power (electricity plus advanced chips). Economic moats are not built around big offices or big factories, but proprietary networks and the data they generate.
The networks of this age are multi-faceted and intertwined. On top of communication networks (satellites and cables) we have financial networks (Visa, MasterCard, Swift), as well as social networks (X and others). These networks generate vast amounts of data that in turn fuels the vast computer intelligence that is evolving ever faster.
This age is also characterized by ever faster innovation and disruption, yet those that control the networks and the computers will yield unprecedented power.
So what does this mean for entrepreneurs working with QED and building in this age? Access to proprietary data and building a network is most certainly the holy grail. If your business does not have strong elements of this, even if in a niche form, you may want to reassess your business plan.
Given that the pace of innovation and disruption is increasing, opportunities for entrepreneurs are also multiplying. Look for incumbents that are hampered by regulation and may be slow to react to the new age.
The skills that are needed in this age are agility, speed, adaptability and calculated risk taking. Taken together, these amount to being anti-fragile – building organizations that emerge stronger from each successive disruption and shock. You will also have to be good at incorporating non-human agents into your org structure. Sounds simple, but laws, regulations, and human nature will complicate it.
Yet capital is still needed. Computing power will not be free, whether from humans or machines. And acquiring customers still costs money. As QED, we are here to help.
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