In a post now six years old and yet still very relevant today, Clay Shirky lays out why complex business models are not necessarily an advantage anymore. His premise:
In 1988, Joseph Tainter wrote a chilling book called The Collapse of Complex Societies. Tainter looked at several societies that gradually arrived at a level of remarkable sophistication then suddenly collapsed: the Romans, the Lowlands Maya, the inhabitants of Chaco canyon. Every one of those groups had rich traditions, complex social structures, advanced technology, but despite their sophistication, they collapsed, impoverishing and scattering their citizens and leaving little but future archeological sites as evidence of previous greatness. Tainter asked himself whether there was some explanation common to these sudden dissolutions.
The answer he arrived at was that they hadn’t collapsed despite their cultural sophistication, they’d collapsed because of it. Subject to violent compression, Tainter’s story goes like this: a group of people, through a combination of social organization and environmental luck, finds itself with a surplus of resources. Managing this surplus makes society more complex—agriculture rewards mathematical skill, granaries require new forms of construction, and so on.
Early on, the marginal value of this complexity is positive—each additional bit of complexity more than pays for itself in improved output—but over time, the law of diminishing returns reduces the marginal value, until it disappears completely. At this point, any additional complexity is pure cost.
Tainter’s thesis is that when society’s elite members add one layer of bureaucracy or demand one tribute too many, they end up extracting all the value from their environment it is possible to extract and then some.
The ‘and them some’ is what causes the trouble. Complex societies collapse because, when some stress comes, those societies have become too inflexible to respond. In retrospect, this can seem mystifying. Why didn’t these societies just re-tool in less complex ways? The answer Tainter gives is the simplest one: When societies fail to respond to reduced circumstances through orderly downsizing, it isn’t because they don’t want to, it’s because they can’t.
In such systems, there is no way to make things a little bit simpler – the whole edifice becomes a huge, interlocking system not readily amenable to change. Tainter doesn’t regard the sudden decoherence of these societies as either a tragedy or a mistake—”[U]nder a situation of declining marginal returns collapse may be the most appropriate response”, to use his pitiless phrase. Furthermore, even when moderate adjustments could be made, they tend to be resisted, because any simplification discomfits elites.
When the value of complexity turns negative, a society plagued by an inability to react remains as complex as ever, right up to the moment where it becomes suddenly and dramatically simpler, which is to say right up to the moment of collapse. Collapse is simply the last remaining method of simplification.
His remarks are addressed to a room full of TV executives concerned about protecting their business online where increasingly people are making different choices when it comes to video. Shirky provides a good example of how assumptions in business can lead us astray.
Using the statement from many executives (in italics), he demonstrates how choice works, “Web users will have to pay for what they watch and use, or else we will have to stop making content in the costly and complex way we have grown accustomed to making it. And we don’t know how to do that.”
We don't know how to do that, even though we're enamored with data science, systems theories, and complex adaptive systems. Because what we forget is that they are tools that allow us to look back, to diagnose the past, or at the very least things that don't move or change.
But things change all the time. A short, extemporaneous YouTube video uploaded by a parent showing their baby doing something can and does get more views than a professionally produced video. See “Charlie Bit My Finger” with more than 842 million views. Right place, and right time, right amount of cuteness, it feels more genuine to people, and so on.
It's not just video. Reddit Founder Alexis Ohanian shared how an anonymous simple post on its network generates over $60,000 monthly for a small mattress company. This is also an example of an organic system made up of people with different points of view who share a common purpose. The conversation took on all kinds of directions, but for that reason it retained its simplicity and served those who had a specific need. The complex mattress market ends up on the losing end.
As Shirky says:
When ecosystems change and inflexible institutions collapse, their members disperse, abandoning old beliefs, trying new things, making their living in different ways than they used to. It’s easy to see the ways in which collapse to simplicity wrecks the glories of old.
But there is one compensating advantage for the people who escape the old system: when the ecosystem stops rewarding complexity, it is the people who figure out how to work simply in the present, rather than the people who mastered the complexities of the past, who get to say what happens in the future.
We want a good night sleep, not the headache of buying a mattress—or calling long distance, or watching uninterrupted shows, or getting real news, and so on. When the experience of dealing with a system becomes to much, we opt out. Smart people who underestimate ingenuity and the law of diminishing returns in the absence of a protective bureaucracy are in for a rough ride.
The curious rally to find new ways to do the job.