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Business models and their meaning for you, who lives to learn

Do you need to fit into businesses, or do you need to fit the business model into what you believe and what you want? Today, we’ll take a look at the the main models within reach, and their relationship with knowledge, conversation, and those things we value.

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The idea of fleeing the dysfunctional labor market is something you share with many, but, you ask, what are the alternatives? The truth is that the range is immense, but it’s worthwhile to pause a moment on the “big models” we’re offered out there.

Traditional small industry

Most industrial SMEs still have a model, a common conception, of business that goes beyond the relationships between the people who work in it or its legal structure. It’s an old model inherited from nineteenth-century capitalism, but above all, from the breaking of the production chains in the automotive industry and other big industries at the end of the ’70s. At that time, a lot of big brands chose to close workshops and subcontract what was done in them to companies and cooperatives that employed the same workers. What did they have to do? Simply, the same thing they’d always done. But if demand dropped off, or if you wanted a better salary, it was no longer Fiat or Volkswagen’s concern — it was internal to the workshop, your workshop. Inspired by the Japanese idea of keiretsu, big brands diversified their providers, and made themselves relatively immune to labor conflicts. Industrial organization, which up until then had served to concentrate power, laid the foundation for a new form of production, which was atomized, but rigidly hierarchical. One Toni Negri became famous by theorizing about the world that would come out of the new Fiat.

In this model, a businessperson is a gentleman who buys a machine that produces something, hires people to run it, and sells the result. Nothing more. Along the manufacturing path of, for example, a car or an airplane, there will be various partial assemblers in a structure in which changes are guided by big brand names. Innovating in this framework means buying the machines necessary to respond to the new demands that come from “above.” The key is in planning well for future income against payments and the financial costs of buying them, and the salaries that remunerate the workers. That’s why it’s possible, in this context, to talk about things like “planned innovation,” which is an oxymoron in the real world we know. Certainly, when reality doesn’t adjust to the plan, the businessperson can’t ask for more “flexibility,” which is to say, co-responsibility from the salaried workers and their incomes in the process. This is the framework of a good part of the traditional union debate, and of the alternatives in industrial organization.

The effect of the reduction of the optimal scale of production on this kind of business does not have the liberating effect that it promises for the rest of society. On the contrary, since they are “one-technology businesses,” and they are not part of developing that technology, if the optimal scale of that technology falls (which is happening, for example, in many of the machines that make parts for a multifunction, programmable robot), certain costs make it quit likely that their clients will simply integrate it into their internal process, reducing risks of hold-ups in delivery… even if costs remain competitive. Technological development, the underlying innovation, doesn’t appear as somthing that can be contributed to or oriented, much less something whose orientation it make sense to discuss, but as something that is often negative: almost always dangerous — if you don’t have the wherewithal to buy the latest machine the assembler above you asks for — and other times, fatal — if they decide to buy it themselves.

Under a model like this, knowledge is knowing how to use a machine or carry out a process you didn’t design. Or, when things go badly, the process might belong to an alternative, lower-cost provider in an emerging market. But there’s no relationship between the knowledge that’s developed and the evolution of the technology or the tools. That’s why the industrial conversation is not about technology or innovation. It simply wouldn’t provide them with anything — they are consumers, not agents, of technological change that comes from outside, from the upper levels of the chain. That’s why, as Juan says, the industrial world doesn’t value abstract knowledge, but applied knowledge.

That’s also why the industrial conversation is centered on where knowledge itself can be incorporated into the productive process, because there’s enough autonomy in the organization to do it and have an impact on the results: the organization of work and the relationships between the people that make up the business. This is where to learn from the industrial world. And believe me, there are jewels.


When the social use of the Internet began to expand, and capital began to flow towards the web, before the “dot-com bubble,” that model changed… but only superficially. The business model that emerged then was the “start-up.” It was based on the technology being “new,” and whoever has “vision” could become a leader or primary assembler of new industries. It was no longer about buying the machine, it was now about buying an entire embrionic business. The new models were ranked to facilitate investment, and a whole ecosystem of investors emerged for different stages (seed capital, risk, etc.).

Investors in start-ups needed knowledge. But beware, their business consists of revaluing their investments, their shares, to be able to sell them to the next level up the pyramid, not the product. The knowledge this requires is really not knowledge of the technology or its social impact, but of what moves other investors. As Keynes once said about the stock exchange, it’s like a beauty contest where we have to vote not for who we think is the most beautiful, but who we think others will vote for as most beautiful.

Investors in start-ups want two kinds of knowledge: one, located in the business, and well-guarded by ever-more restrictive legislation on intellectual property, takes the form of patents. It can even be measured numerically in patents, because it isn’t the creation of knowledge, but rather the walls that prevent its use by anyone else, that will allow the business to sell what’s been developed to other companies — like those described above — who apply it to machines and processes. No one cares what that means or about its social impact. In fact, it’s better not to know.

And then, of course, there’s personal knowledge. There, what matters is intuiting just ahead of the overwhelming wave of hype, styles, and buzzwords(web 2.0, nanotechnology, biotechnology, cloud, etc.) what’s going to guide buying and high-risk investors. Again, it doesn’t matter what the social meaning might happen to be. That doesn’t have the slightest influence on its success.

In one case after another, investor knowledge in start-ups is as passive about its meaning as it is in a traditional business.

Community companies

But the development of distributed communication and the shrinking optimum scale of production brought other worlds. The more the optimum scale shrinks, the more viable it became, and in more fields, to have a new business model based on a new work ethic, in which knowledge plays a central role. A new commons appears, a mass of knowledge and free (in both sense of the word) tools, maintained and developed by large, distributed communities of people who work with them and erode the centrality of monetary capital to the founding of a business. The central concern of businesses becomes the need differentiate themselves, which equates improving the commons. And with that differentiation based on support of the commons, they go to market… to sell hours of labor, not to harvest rents. The commons, then, defines, a new form of capital (and market) which radically changes the rules of the game.

But if we observe these businesses, whatever they might do (software, psychology, vehicles, advanced services, property, design, architecture, or whatever), we see that what’s important is their relationship with knowledge. In fact, we could say that their focus is not on having extremely specialized knowledge, but in capturing new knowledge and learning to provide something back to the already-existing knowledge commons (in their field or in others).

So, they are small-scale businesses, generally more or less “flat,” based on conversations — learning processes — more than on processes. They are about knowledge that provides tremendous value and which extends to understanding, in fact, even to causing social change, because, thanks to renouncing intellectual property, its use is socialized immediately, diluting its own advantageous position into mere prestige (useful for selling hours of labor, but not for charging much more for them than the market average, at least not for long).

But a conversation is not something that is produced simply because a businessperson hired a bunch of people to develop or do something. These models, which are cooperatives, even if they’re LLCs or even corporations on paper, emerge from discussions in networks, from debates that are ongoing among friends, family, and close-knit affinity groups. They emerge from real community, and provide it with sovereignty of different kinds (from those that are limited to sharing some infrastructure and costs to those that function as a community of goods). That’s why we call them community companies.

Where do you think you can fit in?

It’s actually a trick question. Sorry. If you read this blog, it’s quite probable that you’re part of a culture where the idea of having an interesting life sounds like the highest objective you could hope to aspire to, and the idea of success as the possibility of permanent learning doesn’t sound strange.

Anyway, it’s unlikely that the first model will give you a job before it pulls out of the crisis. The second isn’t creating any huge number of jobs, either. And in any case, who wants to be a wage slave to a bunch of speculative investors, when you could be an equal among peers who learn every day?

Translated by Steve Herrick from the the original (in Spanish)

«Business models and their meaning for you, who lives to learn» recibió 0 desde que se publicó el Domingo 9 de Junio de 2013 . Si te ha gustado este post quizá te gusten otros posts escritos por David de Ugarte.

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