Converting Internet into Social and Money Power

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Power is the capacity to accomplish work. There are countless forms and expressions of power in different planes and fields of activity. Physical power is the capacity to move objects. Technological power is the capacity to harness scientific and technological knowledge to improve the speed, efficiency, quality and reach of mechanical, electric and electronic processes. Military power is the capacity to wield and control the behavior of other governments or groups by the threat or use of force. Political power is the capacity to control or influence the creation, execution and administration of laws. Market power is the capacity to attract and retain customers. Money power is the capacity to create, generate, attract or control the use of money.

Society is an all-inclusive plane that encompasses all these fields of activity in which individuals and groups act to fulfill their goals and aspirations. Social power is the power to accomplish results in society, whatever the results, which individuals and groups of human beings aspire to achieve. All other powers exercised by human beings in society are subsets or partial expressions of social power.

Conversion and multiplication of power

Any power can be converted into any other form of power by an appropriate strategy. The physical power of a raging river is transformed into electrical power by means of a dam, a turbine and a generator. In this instance, physical power is converted into technological power that can be applied to energize any technological process. This transformation multiplies the productive value of the river’s power enormously by converting uncontrolled kinetic energy of movement into energy that can be stored, transported over vast distances and applied at specific point to power the life of an entire city.

At the beginning of the 20th Century, the automobile was a rare and expensive luxury product for the exclusive use of the rich. The automobile converted the technological power of the internal combustion engine into transportation power. But Henry Ford believed that the technological power of the car could also be converted into market and social power, thereby multiplying its use value and money value. He understood that the car was a symbol of success and self-respect that appealed to the common man’s aspiration for status and prestige and that ordinary people would pay a high portion of their incomes for the privilege of getting a car of their owning. So Ford looked for a strategy to convert technological power into social power. The strategy he adopted was the principle of the moving assembly line – a means to mass-produce cars in far greater quantities and at two-third lower cost than before. Added to this, he designed a low cost car without frills and priced it within the reach of the common man. This strategy multiplied the market for his cars 100,000-fold. He converted the technological power into social power and social power into money power. Between 1908 and 1927, he produced and sold more than 15 million cars and converted an initial investment of $28,000 into a cash hoard of $700 million – a 25,000 fold increase!

Multiple conversions & multiple strategies

Each time one form of power is converted into a higher form, the resulting power of accomplishment increases by a multiple of 10, 100, 1000 or even more, depending on the nature of the transformation. From the kinetic energy of a river to electricity is one step in transition. From electrical power of the mechanical power of an electric motor is a further step. Ford utilized electricity to power the conveyors, pulleys, lifts and lights that enabled him to achieve high levels of speed and efficiency. Ford understood the basic social aspiration of the common man at one level, but tapped only a small portion of the total social potential.

General Motors started off 17 years after Ford and quickly overtook the pioneer. Under the leadership of Alfred Sloan, GM also harnessed the technological power of the assembly line but added to it the organizational power of the modern multi-divisional corporation. Sloan understood that the social power of the automobile was far greater than that envisioned by Ford. Not only did everyone want a car of their own. Everyone also wanted a car that meet their specific individual needs and expressed the precise level of their social status. So GM introduced a wide range of different cars with different levels of sophistication at different levels of price which it produced and marketed through one of the first professionally managed multi-divisional corporations in the world. Adding one more step in the equation of power conversion enabled GM to multiply Ford’s phenomenal achievement many times more. In eight years GM multiplied its revenues eight-fold, won 45% of the US car market, surpassed Ford in size, grew profitably right through the Great Depression and remained the largest car-maker through the rest of the 20th Century and was for a time the largest corporation in the world.

Infinite Social Power

The potential social power is unlimited. It includes all the combined aspirations, knowledge, resources and capabilities of the society as a whole. All the scientific, technological, industrial, commercial, economic wonders of the past two centuries represent only a tiny fraction of its infinite potential. The unprecedented levels of prosperity achieved by more than one billion human beings have been created out of a small portion of this potential.

Each and every transition point from one form of power to another can be leveraged by means of an appropriate strategy to raise the resultant power and results exponentially. And there are at least 25 or 50 strategies that can be applied at each of these transition points, so that the overall capacity of expansion is virtually infinite.

When Fred Smith founded Federal Express in the early 1970s, he harnessed an existing technological power to generate far greater social power and money power, propelling FedEx from ground zero to the Fortune 500 faster than any other company in history up to that time. FedEx became the first company in US history to achieve revenues of $1 billion without mergers or acquisitions. The technology he leveraged consisted of ordinary trucks and commercial airplanes. The strategy he adopted was a hub system that expedited transcontinental parcel delivery in the USA from three days to overnight. The social power he tapped was the increasing demand for speed. Today FedEx is a $34 billion company with 275,000 employees operating in 220 countries.

The Internet as Organization Power

These remarkable achievements and countless others like them are all ancient history since the advent of the Internet. The Internet represents a whole new plane of power that can transform and multiply all existing forms of power by an additional exponential magnitude.

The foundation of the Internet is technological power. But its vast potential arises from the fact that the Internet has converted technological power of computers, networking and telecommunications into organizational power. The Internet inserts another link in the chain between technology, markets, society and money power – the self-organizing, self-reinforcing and self-multiplying power of a lightning fast, highly integrated, widely distributed and uncentralized global organization.

The Internet combines and integrates so many layers of power that their individual and cumulative potential is difficult to discern. The basic technological power of the Internet can best be distinguished from these other layers by considering an application of these same powers outside the domain of the Internet.

The global development of the credit card industry is a dramatic illustration of this power. The first general purpose charge cards were introduced in the 1950s by Diners Club and American Express. In 1958 Bank of America introduced the first credit card, which need not be paid off at the end of the month, but the Bank Americard was initially accepted only in California where the bank operated and by merchants that dealt directly with the bank. These early systems depended on the use of rudimentary information technology to verify the credit-worthiness of the card holder.

The expansion of this industry was made possible with the development of information technology that enabled instantaneous electronic verification at the point of sale. But a new form of organization was required to fully exploit this technological power. In 1970 Bank of America gave up control of Bank Americard to a group of participating banks throughout the USA. Later it was expanded into a global system and renamed Visa International.

Technological power was one of the foundations of the Visa system. But its real innovation was the conversion of technological power into organizational power, market power and money power. Visa created an uncentralized organization owned by thousands of banks around the world, many of whom were direct competitors with each other. Each bank was free to offer its credit cards to individual users anywhere. Each bank agreed to process the credit card transactions of their local merchant customers. The heart of the organization was an impersonal system for credit verification that generated an environment of trust between buyers and sellers, so that a buyer could walk into a merchant anywhere in the world and make purchases with a credit card issued by a bank anywhere in the world, because the system provided instantaneous assurance regarding the legitimacy of the card and the credit worthiness of the buyer. Today Visa consists of more than 20,000 member financial institutions with 1.4 billion card holders and $4.3 trillion in annual transactions.

The Social Power of the Internet

Visa International converts technological power and organizational power into commercial power of unprecedented magnitude. These serve as the foundation for the power of the Internet, but the power of Internet extends far beyond that exemplified by organizations such as Visa. The organizational power of the Internet can be harnessed to extend and exponentially enhance the reach and productivity of all other social powers. This capacity arises from the fact that the Internet so fully integrates with both the individual and collective needs of the entire global society in a manner achieved up until now by only two other organizations -- language and money.

Language creates and multiplies social power by enabling individuals to interact, associate and co-operate with one another for mutual benefit. Without language society itself could hardly exist. Language leverages the knowledge, aspirations, skills and capacities of individuals and enables them to coalesce into an organized, cohesive social entity capable of collective action and communal living.

Language multiplies the effectiveness of physical interactions between people. Money multiplies the effectiveness of their productive interactions. It provides incentives for individuals and groups to produce the maximum of which they are capable, not just the minimum required for their survival. It facilitates valuation and exchange of products and services over vast distances and spans of time. It makes it possible to store the fruits of past or present labour indefinitely and convert it into any other social product in the future.

The Internet possesses all the capacities of language and money, infinitely extended and enhanced. Language facilitates successive one-to-one and one-to-many communications in time. Money facilitates simultaneous one-to-one and one-to-many transactions over time. The Internet makes possible simultaneous and instantaneous communication, exchange and transactions from all-to-all. The transformative power of the Internet --

• abridges time
• transcends space
• democratizes and distributes power to level the playing field
• multiplies money & increases the productivity of all resources
• converts technological capacity into social power
• integrates all social activities
• creates the first truly global organization
• reveals the infinite potential in the Infinitesimal
• empowers every person & enhances the value of the human being
• generates subtle knowledge
• fosters development of individuality and dissolution of ego
• rewards spiritual values

Transformative Power of the Internet

The Internet interposes a new layer in the chain of power that extends between technology, organization, market, commerce, money and society – a layer that magnifies and multiplies the power of each of the intervening layers. Start-up Amazon leveraged the power of this new layer to enter a field dominated by brick and mortar national bookstore chains and emerge as the largest book retailer in the world within a few years. It converted the organizational power of the Internet into market power by reaching out into households around the world with the largest selection of products available 24 hours a day. It harnessed the power of information to expand that market by analyzing prior buying habits of its customers (strategy) to promote related products and services. It extended the commercial power of its electronic storefront from books, video and music to a much wider range of products and offered its organization as a vehicle for other merchants to market and advertise their own wares.

Late entrant to the search engine business Google leveraged the power of a superior search engine technology to leap ahead in an already crowded field to become the most-used search engine in the world. But its greatest innovation was a unique strategy for converting technological power into market power. Mining the information it obtained from the web, Google democratized advertising. Through Adwords and Adsense, advertisers can reach precisely the audiences they target on a pay-per-view basis and customers are exposed to precisely those ads that best fit their interests. Meeting needs more effectively has enabled Google to become a $12 billion business with 33% net income and one of the most valuable corporations in the world in less than a decade.

Examples

1. E-learning ($100 laptop, MIT Open courseware - http://ocw.mit.edu/index.html)
2. KIVA - Micro-credit to small businesses in need (http://www.kiva.org) - This is a website dedicated to small business owners all over the world who need credit to run their businesses. The Internet connects the lenders with these creditors. Various field partner organizations in association with KIVA ensure that the money is handled properly.

The Internet empowers the Infinitesimal

Money is created by human interchange and until the Internet the capacity of individuals to transact with each other commercially was severely limited by time and location. Only a few multinationals could even partially exploit the potentials of the global market. The Internet empowers the Infinitesimal – the single individual, the single transaction and the unique product. e-Bay enables any individual to sell any product one time or a million times from and to anywhere in the world. Value is in the eyes of the beholder, so the more eyes the greater the value. e-Bay replaces mass marketing with a precision delivery system that matches unique products with unique needs. Founded in 1995 for individual retail sale, it subsequently expanded to include the sale of commercial services, industrial surplus and e-Bay Stores that offer access to a market of over 200 million customers. Last year the company had revenues of $6 billion and a net income of $1.1 billion. e-Bay leverages the technological and organizational power of the Internet to create commercial power for millions of individual merchants and generate social power of hundreds of millions of people around the world to obtain rare, antique and unique products that are not available through normal commercial channels.

Examples

1. Any person or company that genuinely serves a need can sell its products or services to any customer, anywhere, anytime. Small garage start-ups with little capital, but great visions produce products and brand-names like Google, Amazon, E-bay etc. These companies have continued to innovate by sustaining work cultures that empower their employees to experiment and enjoy work. Google's case is particularly interesting and contrary to other public companies. Its employees are encouraged to spend 20% of their regular work week focusing on pet projects (work which has no direct relation to their day-to-day responsibilities). This, as per Google leads to 80% of its new products!
2. The proliferation of blogs has made every blogger an author, whose works can reach millions. You-Tube and MySpace have empowered every user to produce and broadcast music and/or videos. Visitors to these sites can selectively choose to watch from any of the infinite channels! Commercial broadcasting corporations sell their videos through this medium as well. Town-hall meetings, seminars, cultural programs, etc. from everywhere around the world can be found here. These websites are providing new means for individual expression.
3. E-governance is emerging fast and has tremendous potential. Filing taxes online, renewing driver licenses, paying electricity and telephone bills, etc. cut the red-tape.

Harnessing the Power of Society

Markets, money and commerce represent only one component of society and one dimension of social power. The Internet also makes it possible to transform other types of social potential into usable power in ways that were hitherto unimaginable. Wikipedia illustrates the power of the Internet to convert social potential into usable power. Launched in 2001 as a voluntary web-based encyclopedia, it now includes more than six million articles in 250 different languages. The five-year-old English version of Wikipedia contains 1.7 million articles compared with 100,000 articles in the 240 year old Encyclopedia Britannica. Britannica is produced by a staff of 19 full-time editors and over 4000 expert contributors compared to more than 75,000 active contributors to Wikipedia who work without remuneration. Wikipedia receives roughly 450 times more traffic than Britannica’s online version. Wikipedia taps the unutilized knowledge, information and intellectual capacity of the global society – retired experts, students, teachers, housewives, NGOs, etc. – which is in potential millions of times greater than that of the finest group of experts that any organization can assemble. It captures types and details of information beyond the scope and beneath the radar screen of professional academics and provides all this information free of cost to the world. In addition by encouraging every individual to contribute in areas where they possess specialized knowledge, it acts as a stimulus for greater knowledge acquisition and distribution. The Internet makes it possible to leverage the unutilized potential of every social resource in a similar manner.

Examples

1. Linux, GNU and the open source movement
2. Social movements for a cause - Global warming, save darfur, green peace, MSF, etc.
3. Offshore Outsourcing - Globalization - impact on China, India, Eastern Europe

Strategies for Power Conversion

Countless strategies can be fashioned for moving from one link in the chain of power to the next and for enhancing the efficiency of energy conversion at each transition point. These strategies fall into numerous categories, a few of which are listed below to illustrate the perspective.

1. Tools & Instruments
   1. When Richard Sear launched his company in the early 1890s, the American farmland was prospering and the rural community aspired for access to modern industrial and consumer goods. Sears utilized the mail order catalog as an instrument to convert the rising social aspirations and purchasing capacity of farmers into market power. Within a few years Sears became the largest purveyor of merchandise to rural America.
2. Standards
   1. The technological and organizational power of the Internet was transformed from a global multi-directional network into an interactive on-line community – the World Wide Web – by adoption of a common technical language for all communications – html. The social impact of this change was parallel to but far greater in magnitude than the evolution from radio to television or from telegraph to telephone. The significance of this change cannot be measured in purely quantitative terms on one dimension because it created qualitatively new multi-dimensional potentials millions of times greater that simply did not exist before adoption of the standards.
3. Systems
   1. GM introduced a system of market intelligence feeding information back from its national dealer network to production centers regarding precisely the volume of demand for each make, model and color of automobile, enabling them to fine tune production to market needs. The system magnified the conversion of productive power into market power.
   2. Dell went one step further with their latest generation technology for customized mass production. Whereas GM’s system made it possible to forecast approximate customer demand and adjust production to meet changes in the market, Dell’s system provides a perfect conversion of production power into commercial power by producing each item to order. The strategy of mass customization in turn stimulates growth of the market by matching customer needs and product features more precisely than was ever possible in the past.
4. Trust
   1. Social accomplish takes place on a foundation of trust. Anything that enhances security, confidence and trust between parties to social transactions or between the parties and the transaction itself increases the conversion of potential into actual results.
   2. Those living in the rural parts of America in 1900 had a natural suspicion about the reliability and integrity of big city business and were reluctant to deal in anything they could not see and touch. When Julius Rosenwald took over as head of Sears at that time, he adopted a novel strategy to overcome this suspicion and reluctance – the policy of satisfaction guaranteed or your money back. Within 20 years Sears became the largest retail organization in the entire world.
   3. The global expansion of Visa International and other credit card companies was made possible by an organizational technology that created an atmosphere of trust and confidence between buyers, sellers and banks that had no prior knowledge or dealings with one another. With the advent of the Internet and e-commerce, this same strategy enables any member of the global on-line community to sell merchandise to any other member without any knowledge or concern regarding the trustworthiness of the other party. Enhancing Trust is a strategy that multiplies the conversion of market potential into market power and money power.
5. Harmony of Changing Social Needs
   1. A company is a child of society, born of social needs and nurtured by the expanding opportunities generated by the process of social development. But like all children, as a company develops and matures, it forms a personality of its own that is capable of acting independently and even at odds with the general direction of social progress. Attuning corporate strategy, values, products, services, standards, policies, systems and technologies to evolving conditions in society is a powerful strategy for more fully leveraging social opportunities and converting technological, organizational and market power into money and commercial power and social power that fosters the development of society.
   2. Sears’s money-back guarantee and Google’s Adword program both applied a variation of this strategy by formulating approaches based on the customer’s point of view.
   3. At a time when the US Postal Service and UPS ignored the evolving commercial and social context, startup FedEx grew by riding on the crest of the surging social need for speed.
6. Information
   1. Information can be utilized to increase the productivity of every other resource and multiply the power of every power.
   2. Sears grew to become the largest retailer in the world by attuning its strategies to emerging social needs. But it did not stop there. In the early 1920s, General Robert Wood opened Sear’s first retail suburban department store, which became the prototype for the explosive growth of suburban shopping centers around the USA. Wood got his inspiration for this change in strategy by studying information in the US statistical abstracts. This information revealed two significant trends: the US population was becoming increasingly mobile due to the spread of the automobile and middle class families were migrating from urban centers to suburban residential communities far from the shopping centers in downtown urban areas. Wood’s strategy for opening suburban shopping centers in response to these demographic trends enabled the company to continue to grow rapidly right through the Great Depression when overall department store business in the USA declined by 25%.
7. Speed
   1. Up to a point, increasing speed increases productivity at the existing level of activity. Beyond a certain point it elevates any activity to a higher plane of potential where its power expands geometrically.
   2. The 10 fold increase in speed made possible by migrating from 56K modems to ADSL and the further 100 fold-acceleration achieved by fiber optic cable transmission does not just increase speed, efficiency and productivity. It transforms computing from a local activity to something that can be carried out from remote locations anywhere in the world. It makes possible grid computing on a global scale, harnessing the underutilized capacity of millions of PCs to make available to every user on the system a computing power thousands of times greater than that of the fastest supercomputer.
8. Values
   1. Speed is an operational value. What is true of speed is true of any operational value when appropriate strategies are fashioned to elevate performance on that value to peak levels.
   2. FedEx also understood the value of communication as a strategy for converting organizational power into people power. Instituting one of the most comprehensive and effective programs of employee communication in the corporate world, the company has demonstrated that individual commitment and productivity of employees can be elevated far beyond normal levels.