Tuesday, June 27, 2023

The clerisy is the breeding ground of Change Merchants. Fear has to be created in order to drive regulatory change in order to sustain the clerisy.

A very interesting argument.  From Change Merchants by N. S. Lyons.  The subheading is Rule by “Virtuals” leads to constant disruption.

The essay is worth reading in toto but the heart of it is:

Whether an academic, a journalist, a financial analyst, or a software developer, a member of this Virtual class makes his living—and, indeed, establishes his social and economic value—by manipulating, categorizing, and interpreting symbolic information and narrative. “Manipulate” is an important verb here, and not merely in the sense of deviousness. Such an individual’s job is to take existing information and change it into new forms, present it in new ways, or use it to tell new stories. This is what I am attempting to do as a writer in shaping this article, for example.

Members of this class therefore cannot produce anything without change. And they cannot sell what they’re producing unless it offers something at least somewhat new and different. Indeed, change is literally what they sell, in a sense, and they have a material incentive to push for it, since the faster the times are a-changin’ in their field, or in society, the more market opportunity exists for their products and services. They are, fundamentally, merchants of change.

This is not a new observation. As the writer Kevin Phillips noted in Mediacracy in 1975:

Change does not threaten the affluent intelligentsia of the Post-Industrial Society the way it threatened the landowners and industrialists of the New Deal. On the contrary, change is as essential to the knowledge sector as inventory turnover is to a merchant or manufacturer. Change keeps up demand for the product (research, news, theory, and technology). Post-Industrialism, a knowledge elite, and accelerated social change appear to go hand in hand.

What has shifted since 1975 is that the proportion of would-be intellectuals and other Change Merchants in society has grown vastly larger as our manufacturing sector has declined and we’ve steered a greater and greater share of young people into postsecondary education. We face an ever greater surplus of “knowledge elites,” who form a growing portion of our ever more postindustrial economy; therefore, ever more intra-class competition rages as these elites attempt to sell unique theoretical “products” in disruptive new ways. The result is a vastly elevated number of suppliers of social change. And that supply creates its own demand.

The most vibrant example of this dynamic today is academia. In recent years, many have lamented the infiltration of political activism into the ivory tower, allegedly once devoted purely to the pursuit of truth. But the whole structure of academia is almost perfectly designed to incentivize activism. To advance in or merely survive the competition of their crowded fields, academics must constantly strive to produce something—anything—new and seemingly innovative. It’s “publish or perish.” In other words, academia creates its own demand for continual disruptive change. And activism maximizes opportunities for such profitable disruption. After all, academia is a “marketplace of ideas,” and sellers in a marketplace will naturally advertise to stimulate demand. Some naive academics may have hitherto sought only to understand the world, but the whole point of academia is to sell the need for academics to change it. Activism is the inevitable strategic business innovation of the academic market.

Today, almost every sector of the postindustrial economy operates with a similar incentive structure. Fast culture is good business for the same reason as is fast fashion. Just as promoting hedonism and conspicuous consumption can stoke demand, so a strong incentive exists to promote a whole suite of values that encourage sustained and faster change. Values that scramble sensibilities, obliterate old borders, uproot ties that bind, eliminate the limits of old obligations, pry open and plunder distinct and exclusive communities and cultures; or that discover new rights, or temporarily establish fashionable new moral norms that suddenly compel conformity; or that launch grand moral crusades—all create new demand for services that otherwise wouldn’t exist. “Progress” is profitable.

By contrast, the prospect of deaccelerated change—or, worse, the notion offered by conservative traditionalists that there exist permanent truths, a fixed human nature, or inherited ways of life that have already provided best-fit solutions to intractable human challenges—is, in a real sense, an existential threat. Like the shark who must keep swimming constantly in order to breathe, the Change Merchant finds that stability means death.

I add corroborating support from my career as global partner in an audit, tax, and management consulting firm.  But my experience was extendable to adjacent fields such as lawyers, merchant bankers and others as well.

Business was never so good as when there were new regulations coming down the pike.  No new regulations for a couple or three years and growth would flatline, profits shrink.  Partners would begin to get antsy and cast about for new services to sell.  But that was challenging.  With regulations, clients have to buy.  Without regulations, the new service has to stand on its own beneficial merits.  And truly productive work is hard work.  

HIPPA was a windfall.  Sarbanes-Oxley was manna from heaven.  Y2K, salad days from an earnings perspective.  But let there be no major regulatory change for two or three years and it was as the Israelites wandering in a desert barren of revenue growth or profits.

The phenomenon was known and understood but had no particular name.  Change Merchants will do. 

Not all regulation is useless or self-defeating.  Not all change is from regulations.  But they are all part of the same financial ecosystem.  

For much of the economy, and certainly as a partner in a management/IT consulting firm, technology, powered by Moore's Law, is already a natural change environment.  The S-curve of all new technologies have been, largely due to Moore's Law, steepening over the past four decades.  It is now a frenetic scramble as the S-curves of new technologies begin to scramble one another and the mean time of adapting to new technology is now greater than the mean time of new technology evolution.  If it takes five years to recognize, invest in, and reap benefit from a new technology and the S-curve of that technology is 30 years, all is good.  If the S-curves of new technology are 3 years, we are in unsettled times.

And those are the shoal waters we are currently shooting.  In 1900, any new technology, such as electric refrigerator's, might have a forty-five year S-curve from introduction as an expensive exotic to the time where they became a universal consumer good.  For internet connected smart phones, the S-curve was more like ten years or less.  

Technology drives its own massive change environment.  There are risks and dangers to it but it is broadly beneficial with everyone ultimately becoming richer, more efficient, and more effective.  

Lyons is focused on a different class of change - elective change arising from the governance process and far more driven by sociological forces and insider financial interests than is technological change.  And critically, from my perspective, far more ambiguous in terms of its actual benefits.  It is beneficial to the Change Merchants of course.  But to everyone else?  That is far from clear.

Most regulations seem to end up being ineffective, counter-productive or to have a sting in their tail of unexpected consequences.  

And there is a second order of regulatory driven change.  There was a clear need for privacy considerations underpinning HIPPA whether HIPPA ended up serving that end well or not.  There was a clear need for improved transparency behind the push to Sarbanes-Oxley.  Some class of regulation is indeed necessary, whether it is well designed regulation or not.

But the class of necessary regulatory change plows the field for a more toxic and dangerous form of elective change.  That arising from ideology or advocacy or simple Change Merchant greed.  Regulatory changes driven by baseless fear and without empirical grounding and with no clear benefit.

Anthropogenic Global Warming

Public Health a la Covid-19

Income Inequality

Social Justice

Systemic racism 

Decarbonization

Defunding the police

Vision Zero 

Critical Race Theory

Recycling

DEI

ESG

Etc. 

There is no clearly measurable benefit arising from any of these.  Certainly a rhetorical argument can be crafted for any and all of them.  But each comes at a cost and there is no robust benefit to any of them.  All the financial benefit is front-end loaded and targeted to the pockets of the Change Merchants.  There are beneficiaries of each of these advocacy movements but it is all rent-seeking financial benefit and represents no improvement in productivity, efficiency or effectiveness accruing to the nation or public.  

Lyons also touches on the issue of class and self-interest of the clerisy in creating, through propaganda, the fear necessary to carry their baseless arguments into the realm of discretionary regulatory change where rent-seeking profits can be manufactured from thin air and with no benefit to the coerced public.

Kudos to Lyons for articulating this process.

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