The Corporation in the Twenty-First Century summary

It’s impossible to tell the story of humanity’s progress over the last two centuries without talking about capitalism. And once you start doing that, it’s impossible to avoid the name of a famous Scottish economist: Adam Smith. 

Capitalism was still in its infancy when Smith began analyzing it in the eighteenth century, but he intuited its revolutionary future. In a famous passage, he invites us to take a tour of a pin factory. The manufacture of this common household item, he promises, will unravel the secret of the wealth of nations. We look on as one man draws out a length of wire and a second cuts it. A third points it; a fourth grinds it. Adding the head requires three workers, and wrapping the finished pin in paper is a trade in itself. 

There’s a term for someone who combines and coordinates: entrepreneur, a French word that literally means “to take between.” It referred to the organizer of a particular kind of assemblage – the manager of theatre productions – before taking on the wider meaning it has today. 

Entrepreneurship in the original sense of combining and coordinating is the secret sauce in one of our era’s most iconic products: the smartphone. There’s little this device can do that we couldn’t do before Steve Jobs unveiled Apple’s iPhone in 2007. We had telephone booths to make calls when we were out and about and regular cameras to take pictures. We opened emails on desktop computers, called specific numbers to order taxis, and watched the weather forecast to see if it was going to rain tomorrow. But the smartphone combines all these functions in a device that fits in your pocket. That’s what makes Apple so profitable: it has a knack for creating highly desirable assemblages that are more valuable than the sum of their parts. 

So far, we’ve talked about capitalism without mentioning ownership. That concept inevitably brings up the name of another famous economist: Karl Marx. 

For Marx, capitalism is all about ownership of the things humans make in order to make other things – the “means of production,” as he calls them. That includes tools, looms, assembly lines – and pin factories. If you don’t own capital (or land), you have to work for the people who do: the capitalists. Workers use capital – the capitalists’ tools, factories, and assembly lines – to produce commodities for a wage. Control over what gets made under which conditions is entirely in the hands of the owners. Ownership and power are synonymous. 

If you assumed that the plane you’re sitting in belongs to the company whose logo is printed on the fuselage, you’d be wrong. Most aircraft bodies in fact belong to aviation leasing companies like the Irish-American business AerCap. These companies don’t employ pilots, but they do have lots of accountants and lawyers on hand to draft contracts. AerCap, or one of its competitors, owns the fuselage, but it doesn’t own the engines. Those belong to a separate company that sells supply and servicing packages contracted from the engines’ maker. 

It’s the same with Amazon warehouses and delivery trucks, which are also leased. Amazon doesn’t even own the servers it needs to run its most profitable product, Amazon Web Services – that’s hosted on data centers entirely owned by a company called Equinix.