Wednesday, August 12, 2009

Age of Economic Transition

In the 2nd Century AD, Ptolemy devised a theory of the universe that placed the earth at the center of the solar system. That theory accounted for all information known about the universe and allowed for accurate prediction of the seasons. It was an incorrect model but provided a result that was adequate for its time.

As science continued to develop new information about the universe, Ptolemy's model came under criticism. Copernicus suggested an alternative model that placed the sun at the center of the solar system. His theory accounted for all known information but did so in a much simpler manner than Ptolemy. Galileo later proved Copernicus correct but the transition from a Ptolemaic orientation to Copernican was traumatic.

In the 17th Century, Newton provided theories about motion that explained the movement of objects in the heavens and objects on earth. His theories accounted for all the information available at the time. Later, Einstein reconstructed theories about motion and the universe in a way that replaced much of what Newton put forth as law. That transition threw much of physics in disarray but ultimately led to even greater discoveries.

Today, American culture is emerging from a period of transition easily as traumatic as the transition from Ptolemy to Copernicus or Newton to Einstein. We have witnessed this in every area of life. Now, that transition has reached our economic system.

When we began this Great American Experiment, Adam Smith Capitalism was in vogue. At the time, individualism reigned and Smith's theories fit well with America's worldview. Using his ideas, America was propelled to great heights of economic power. But American culture is not stagnant. It has continued to develop. Now, American culture is no longer driven by individualism but by relationalism - the notion that value and meaning are derived from relationship. Fact is no longer seen as absolute fact, but as interpreted fact with the interpretation determined by one's relationship to the 'fact' in question.

Cultural shifts are risky and both Liberals and Conservatives are running scared. Conservatives have rallied around a Darwinian view of capitalism - only the strong survive. While Liberals promote a collective policy - the State should insulate everyone from risk. Neither approach is adequate for American society. Both are passing away. In their place a new era of American Entrepreneurship is emerging. Old forms of employment, business and economics are passing from the scene. New theories and forms are rising to take their place. Just as the ideas of Copernicus, Newton, and Adam Smith replaced those of their predecessors, so also new ideas and forms are replacing theirs.

We live in an era of empowerment and that empowerment reaches to the most vulnerable levels of society. In the coming century, that empowerment will unleash American creativity in an explosion of ideas, solutions, and commerce unlike any in the history of mankind.

1 comment:

Tom Sinclair, Home Inspector said...

Great analysis. Thank you. Please take it further and describe in more detail what you think the future will look like, especially businesses and business models.