How Blockchain May Finish Off Big Corporations

02.03.2016

Old-fashioned corporations and traditional business schemes continuously give ground these days. As the world gradually submerges in the ocean of postmodernist paradigm, the very essence of successful businesses is changing, with a term ‘Uber moment’ used to refer to those changes.

Indeed, the same Uber is a cab company that owns no cars. Similarly, Alibaba has no stock, Airbnb manages no real estate, and Facebook does not have its own content. Yet all those companies have already disrupted traditional markets with innovative approaches never seen before on such a scale. Crypto-technologies, being as disruptive as the abovementioned companies, may just finish off the old system. Realizing the conceptual causes and consequences of the process involves consideration of numerous issues.

The Crisis of Corporate Capitalism

While in the early days of capitalism its inherent crises were sparse, nowadays those crises occur nearly every ten years, with the time span between two consequent crises shrinking. No economy can successfully develop when another market bubble is about to burst any moment, while average companies become more and more short-living.

One of the possible reasons for that, some experts say, is that corporations have lost the exact thing that initially catapulted them to success. While companies currently recognized as corporations, started as risky initiatives driven by a daredevil entrepreneur, the traditional early-capitalism model changed as their staff and managerial schemes grew more complex, with only giants eventually finding their place under the sun. Currently, only extremely wealthy people with capital stock rule the day.

Major corporations tend to eat up entire industries. Just a small group of industrial holdings produces most of the goods we use everyday. Moreover, they work synchronically to maximize their revenues. The lack of actual competition alongside with long-lasting illusion of presence thereof drive the world’s economy to another crisis.

Corporations, being that big, are inevitably clumsy. Their only and supreme goal is to earn more money, with all other aims subordinate to that. Complex decision-making and Kafkaesque red tape render any development and progress difficult, if not impossible. Such corporations run along old-fashioned rails and use well-proven schemes, and changing their ways is onerous.

Most importantly, any corporation seeks to minimize risks. While it may seem quite reasonable, this causes them to stifle innovations. A notable example of that is a story from late 1990’s, when a Microsoft officer came up with an idea of what now known as iPad. The officer proposed the company to develop a tablet computer, but the giant corporation refused as it saw no potential in the idea. Nearly ten years later, another corporation driven by an individual entrepreneur took a risk of developing this kind of computer, and we all know how it ended.

Unwillingness of major companies to risk minimizes their profits. A well-known record label of the sixties, Decca Records, opted not to risk signing in two unknown bands considering their music commercially senseless. One of the bands was the Beatles, and the other Genesis. One may only imagine how hard they were kicking themselves just a few years after the rejection. Probably, as hard as Microsoft, when the corporation realized the amount of lost profits.

Generally speaking, a major corporation does not seek a way to solve customer’s problems, it seeks a way to make a customer pay. And the logic here is quite simple: if a customer bought a product or a service earlier, the only thing to do is to keep them loyal. So, the lion’s share of corporate expenses accounts for marketing.

With four well-known P’s of marketing – product, price, place, and promotion – only one is truly changeable for a clumsy corporation, and it is promotion. The only way they may cause their product to sell is to oversaturate it with advertising. There is 30 to 70 percent of a product’s prime cost justified by marketing, while only 4 to 15 percent are actual production expenses. In fact, when a customer buys a product, they pay a 50% tax for persuasion to buy it.

However, this traditional scheme gradually loses any efficiency, as it does not cover customer needs, but only those corporate.

Innovative entrepreneurs are not afraid of taking risks. In fact, that’s the only way for them to succeed. For that reason, innovative startups go bankrupt in parcels. According to the expert assessment, only 0.3% of such startups become successful, but their success is immense. Google and Facebook are good examples of such projects.

An innovative startup is always aimed at a particular problem it seeks to solve. It cannot predict whether the offering is capable of attracting a customer, and usually it cannot afford a serious research, and the only way to find out is to actually make the offering. This is the kind of risk no corporation will ever take.

Contrary to the corporate shares in a product’s prime cost, much of an innovative startup product’s prime cost is accounted for actual production and R&D. However, marketing in that case is simple and inexpensive, as any problem the startup seeks to solve generates a demand for a solution.

The reason why the world shifts to a different business model is that the postmodernist paradigm is coming. It involves the methods people are educated, for example. Those having synthetic education seek to practice all branches of their knowledge. I myself is a good example of this sort of person, as I am both a physicist and a linguist. And the world sees more and more people of my kind.

People like us do not end at major corporations, they seek new ways of expressing themselves. Being a part of a new paradigm, such people are capable of creating something new. The number of innovators grows at exponential rate with all the good reasons. The instances of Brin and Page, or Zuckerberg are quite inspiring after all.

Crypto-technologies, in their turn, perfectly fit the innovative niche in finance. Both technologically and conceptually disruptive, they make a significant contribution in building the new world, with new businesses and new society.

Crypto-innovations

Blockchain technology is all about decentralization. In fact, it hands a perfect tool of disrupting corporate monopolies to those seeking new ways of running a business.

“Corporations are often linked to governments. Bitcoin and blockchain technology may cause them to die as they won’t be able to compete with blockchain-using companies. If bitcoin may free financial sector and market altogether from government regulation, we most probably won’t hear from present corporations ever again. The competition around limited resources will destroy everything that prevents people from living long and prospering,” says Alexey Sherstnev, a decentralization expert.

The decentralization trend is developing. Thus, British musician and engineer Imogen Heap works at creating a free platform Mycelia to help artists have their works repaid by their listeners directly, omitting any intermediary entity like a record label.

“We’ve got this new technology, great possibilities ahead of us, but we’ve got this old cranky system trying to cling on to the remainders of [its] power,” she said. “It’s about trying to take away the power from top down and give power, or at least a steering, to the artist to help shape their own future.”

The platform would enable artists to have full control of their work.

“Blockchain could help artists have their exclusive content and all involved revenues. The most popular of them, I believe, would be those whose records have the shortest and cheapest path to the listener. However, blockchain could enable them to be rewarded for their work directly by their fans. Only time will tell which way is more efficient. However, blockchain is capable of removing intermediaries, just like torrents have eliminated sellers of audio or video tapes,” SherstnevÂ commented.

Similar processes of disrupting monopolies are applicable to almost any field. And, most importantly, once the process of paradigm shift has started, it cannot be stopped any longer. Sooner or later, a new society with a new structure will emerge.

“The nice thing about freedom is that it doesn’t grant any privileges to anyone. A free market never had monopolies. Decentralization as a technology isn’t new. Just recall bittorrents that destroyed monopolies in digital content. State violence cannot protect profits any longer. Even if they manage to imprison all admins of all pirate resources, there will be ten times as much of them in no time. Bitcoin is a p2p technology in the first place, which cannot be destroyed, much like bittorrents,” SherstnevÂ said.

by Jenny Aysgarth

P.S. Alexey Sherstnev is a publicist, a libertarian and a decentralization expert. Currently he suffers from a complex and lethal cardiac defect curable only with an expensive surgery and a heart-lung transplant. Anyone willing to donate him will be welcome.

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Tags: blockchain, Business, Society