The Rise of the Superclass, Lecture by David Rothkopf / Garten Rothkopf (2008)

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Lecture 1
The 80/20 Rule
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The 80/20 Rule

Just twenty percent of the members in any group or social system own eighty percent of the assets, indicative that scale indicates a growing concentration of power. The top 2,000 companies employ and influences a million people in the modern world, says author David Rothkopf. With cross-ownership and networking in all circles - business, military, religion, and the Internet among them - a few succeed, but the majority of participants within any given system are marginal.




Transcript



And power has grown more and more concentrated. Some of you may be familiar with the works of the Italian economist, Wilfredo Pareto, who came up with, at the turn of the century, 80-20 Rule. The 80-20 Rule is wonderful because it applies to everything. It applies to dog racing. 20% of the dogs win 80% of the races. And it applies to rabbit breeding, if any of you championship rabbit breeders, some of you over there are championship rabbit breeders. 20% of the rabbits win 80% of the championship or something like that and it's reductive. Within the 20-80 Rule, there's another 20-80 Rule. And so there's a growing concentration of power and that works in the world. The top 2,000 companies have 70 million employees. Those employees probably have 300 or 400 million dependents, so the CEOs and boards of those companies have direct influence over the lives of four, 500 million people. There are probably another half a billion people who are suppliers or distributors for those companies. That's a billion people who are influenced by those 2,000 people or the boards and the power structure each of these companies varies. But that's a lot of concentration of power particularly consider than in a planet of 6,000 people, or 6 billion people. I live on my own planet. It's called the 'Planet Superclass' and there are only 6,000 people and I'll take you there. Just bear with me here. But I'm on a planet of 6 billion people. Half of those people live on $2 a day, never heard a dial tone. They're not even in the game. Another billion live on a couple of bucks a day. More than that, poverty or something a little bit better than that; really struggling. There are only a couple of billion people on the planet who have anything like a descent living and they report to 2,000 CEOs or their lives or their health care plans or where they're working or what assets are being allocated to them go those people. And it's a very, very tightly-knit group even beyond that. If you take the five largest companies in the world, you take their boards and their CEOs and their key managers, it's about 70 people. Those 70 people are on the boards or in the management of another 150 or so of the world's largest companies and 25 of the biggest universities. So there's a lot of cross-ownership and networking that's going on within these groups and that feeds the concentration as well, but you see the concentration everywhere. You see it in military power. There are a couple of hundred countries in the world, but there are only 30 or 40 with weapons of mass destruction. There are only 20 with missile capability. There are only eight or nine with nuclear capability. There are only three with a thousand planes in their Air Force. But there's only one that can actually wage a global war, only one that can really wage a war in space. And that one country spends as much money on defense as all the other countries in the world put together. And the alliance, that is the principal alliance of that one country, NATO, spends 85% of the money that's spent on defense on the planet and all 10 of the world's largest defense contractors reside within NATO. So military power is highly concentrated. No wonder that there are very few modern wars, but it exists in other areas too. In religion, it exist. There are 4,300 religions on the planet Earth. Of the 4,300 religions, there are only 20 with a million members or more. There are only two with a billion members or more. Now, that suggest that as scale plays a bigger and bigger role and we've seen technology play a dual role in all of these and we can come back to it, there's a democratizing function of technology. But it's not always democratizing. Some people use technology to build global networks, build global reach, have greater global influence and even in the case of the Internet. If you take Google and Microsoft and Yahoo! and MySpace, it's about 96% of Internet traffic in the United States through four or five big corporations. So there is even within this concentration. And also, by the way, a classic place to see the 80-20 Rule is blogs and other places where we thought there would be a lot of innovation. What happens is a few succeed and the rest are marginal. Not unimportant, but marginal. And so we have to see that they are both democratizing forces on all of these. And there are amplify, centralizing global networking forces associated with it to play to the benefit of those that have a concentrated power.

Lecture 2
The Rise of the Superclass
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The Rise of the Superclass

We can't legislate against historical trends in the global age, but we can look more closely at the well-networked superclass - those who have broad influence across international borders on a regular basis. The Superclass has money, power, and influence - but it's woefully short on ethics in the global interest. Author David Rothkopf describes this influential core of the global power structure and stresses that economic prosperity can't be the only metric of a civilization's success.




Transcript



"Is this the system that we want? What's the purpose of the system? What's the objective of the system?" Because for a long time, we believe that the metric to judge, whether society is successful, is economic growth. And the metric within economic growth is sort of net gains in GDP per person or some other thing like that, but this relative inequality is what causes political tension. And throughout history, the story of mankind is elites rising up, overreaching, and then being brought back down. They've been brought back down in revolutions. They've been brought back down in innovation. In Ancient Greece, the tyrants rose up, so on. And Pliesthenes came along and they created what is the forebearer of democracy as a way of balancing out this power. It happened in China. It happened in the United States in the 19th century when the robber barons got too much and the trust-busters came in and they pulled back. What's the problem? Those all happened under the umbrella of sovereignty of the nation state or a city state or a principality. There is no global umbrella of sovereignty. There are no mechanisms to countervail. I'm not saying you want to change it all and I'm not saying that one wants to expropriate it all. But I am saying that we're inviting backlash and we're seeing signs of backlash everywhere. Hugo Chavez in Venezuela, Mahmoud Ahmadinejad in Iran, Vladimir Putin in Russia. In the United States, we're seeing signs of backlash. The backlash takes many forms because many people associated these inequities and these imbalances with globalization itself. And so you've got the absurdity of us trying to build a 700-mile wall and a 3,000-mile border, which to me is the great metaphor for our time and exercise in futility, where not only are you trying to keep people out against the border but you're not willing to build the fence along the whole border. But you're really trying to keep out isn't people, it's the future. We're trying to legislate against a historical trend. It's like if you in 1836 decided to hold a referendum in the UK determining whether or not you wanted the Industrial Revolution to move forward. It's not an option. We can't opt out of globalization. There are technological trends that are irreversible in that regard. But there is unease, and that unease suggest that somebody is going to propose a solution to make the system work better. And that's what led me to say, "Well, let's look at the superclass. Let's look at this group of people." And so we came up with a definition. There was a fairly simple definition. The definition was "people who have influence over the lives of millions of people across borders on a regular basis." Three criteria: influence over millions, has to be international, has to be ongoing. And we thought that we would take a look at this group and we counted it up. And we looked at business, we looked at finance, we looked at the military, we looked at culture where many of the leaders were from the areas of technology that you folks are working in today and we can talk about that a little bit more. Two, we came up with 6,600 or so people, which interestingly is one out of a million. One person in this group for every million people on the planet Earth. And we looked at the nature of the group. We, sort of, broke it down. We looked at the demographics. 60% came from one side of the Atlantic or the other, 60% came from business. What is the most egregiously underrepresented group on this power structure? Any thoughts? Who on the planet Earth? What group on the planet are the most underrepresented in this power structure? Women. Women! 94% of this group is male, 6% is female. So the majority population of the Earth isn't represented appropriately in this power structure. And even in countries where women are allowed an active role in the political life of the country, and I'm just talking now in a national basis, the average percentage representation of women in legislature is 17%. Now, there are other things which may please you in this room. One of the few rooms that will please people. 30% of this group went to one of 20 universities. Yes, yes. Yes, this was one of them. And I think and I gone and made a 30 or 40 universities. It would have been 50% of the group and that's stunning. 180 countries, 6,600 people, and a huge number come up through a few universities. Why? Why? Because that's where the networking starts to take place and networking is one of the great force multipliers in this group. That's where people are trained. It is not, apparently, however where people are trained in terms of the ethics of leadership because this is a group which is woefully short when it comes to thinking about or acting upon the ethics of leadership. So that's something that comes up and you see other things in this group other traits that are different from the past. More of them from the private sector. In the past, the international world was left to the public sector. Power is more transient. In the past, much of it was inherited. That's less the case. Now, to say it's more transient and people actually can get it by coming to the head of an institution does not mean that it's necessarily a meritocracy. I know all of you in this room like to believe in a meritocracy because that's a good set of rules for you guys. But the reality is that, first of all, even in a society like the United States which has the most mobility of any society in the world or has historically, if you're born in the bottom 60%, there's only a 1 in 20 chance that you end up in the top 5 or 10%. So the likelihood that you can break out is very low. But if people were born in most parts of the world with the DNA that you've got, the energy that you've got, the aspirations that you've got, they're out of luck. Because just as gender is destiny in the global power structure, geography is destiny in the global power structure. And in fact, one of the big factors in this which you're not going to hear about in an economics class in all likelihood, is the fact that luck is destiny in this to a large extent.

Lecture 3
The Powerful Alignment of Interests
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The Powerful Alignment of Interests

Sheer brainpower, strength in numbers, and good old fashioned networking is how the nature of world influence is established. Skewed and disproportionate, modern power structures that regulate global problems happen only when the elite meet, says author David Rothkopf. And decisions made based on these meetings often do not adequately represent the people or the interests that they are meant to serve.




Transcript



The reality is it's not conspiracy. What brings this group, its power, is that very often this very different, this very diverse people find that their interests align. And when the interests of the most powerful align about taxes or about regulation or about politics or about global warming, they have - wait for it - more power than the least powerful people, right? And there is a multiplication that comes from the networks that connect them together. And so this is an extremely important component of their power. Another important component of their power has to do with the byproduct of the networks. I go to Davos every year or I used to go to Davos every year. After writing this book, I don't know if I'll be invited back to Davos because I told some of the secrets of Davos which don't, by the way, involve people going into a backroom and planning France's GDP is going to go up and hemlines are going to go down. There is not that kind of planning in Davos. In fact, Davos is a little bit like this. It's kind of a big bloviation festival where people go into rooms to try and find something interesting and very seldom do, by the way. I was talking to Steve Case, the founder of AOL, and he said, "You know, one of the problems with Davos is the feeling like I'm always in the wrong place, and that the real action is in some other room or some other hotel or some other quarter or some place." But when I come back, he said, "What was the punch line? What came out of this?" And ultimately, the conclusion that I reach was that Davos is the factory where global conventionalism is manufactured. But that's the real power of an event like that, that you can get a couple of thousand really important government business leaders together and have them talk through global warming or Iraq or some other issue and have them, sort of, stick their finger in the air and say, "Well, he's a CEO and she's a..., well, it's a woman, so she's probably not a CEO, but he's a CEO." And they feel this way, so I'm kind of comfortable with that. And then they go back to their countries and their companies and they have disproportionate influence and they control means of influence and that view becomes a more predominant view. Now, you might say, Well, wait a minute. That's not the same thing as running the world in secret cabals and you're absolutely right because the world's not run in secret cabals. What it is about is the real nature of power. And the problem with the real nature of power is that it's skewed. It's disproportionate. And the tools that we have historically used to balance it out, tools of governance, tools in which the consent of the governed is that criteria by which we grant legitimacy to such an enterprise, don't exist on the global stage anymore. And that's the real innovation challenge for our time. That's a much harder problem than solving cancer or global warming.

Lecture 4
Redefining Community - And Holding it Accountable
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Redefining Community - And Holding it Accountable

If we don't recognize that the unequal distribution of wealth is unsustainable, then, perhaps, says author David Rothkopf, more sinister political tensions and divisions will ensue. He advocates that the planet needs to reflect upon why we have one set of rules for our geographic community, and a different set of rules for institutions, among them the for-profit sector. Only when we hold the powerful players in economics responsible for contributing to the welfare of our community as we would a neighbor, says Rothkopf, will the interests of the globe at large become balanced.




Transcript



Communities aren't defined the way they used to be. Throughout history, one of the big trends is the redefinition of the size of community. It has been started out. How far could you walk? How far away could you conduct business? It was a walk, and then it was a wagon trip and then it was a horse trip. And each time, the size of the entity got larger and larger. We're now within an arrow in which you can communicate instantly anywhere, anytime. Travel virtually instantly anywhere, anytime. Move anything anywhere, anytime. And that means that the definition of 'community' needs to change, but we haven't changed it. We all have a different set of rules for the communities in which we live compared to the community of the world at large. We have different expectations and we need to change that, and then we need to reflect that somehow institutionally and enterprises that can counter-balance without quashing the things that work in markets that motivate people to succeed. And the reason I'm worried about this particular problem is that if we don't recognize that inequality is unsustainable and we don't move forward in this regard, then other people are going to capitalize on it, the Chavez's, the Ahmadinejads, and the Putins and others. I mean, we had this wacky idea blessed in academia 10 years ago that we had arrived at the end of history, that we had solved all the big problems of the world. Even though the problem that had divided us for 200 years was, how do you get the equitable distribution of wealth in society? And we had thought that we had solved those problems. But, in fact, it's still dogging us. We haven't solved it And this is no reason to believe that we live in the only time in the history of the Earth that there will be one philosophy and another will not emerge as a competing alternative. And if one emerges as a competing alternative and we seem insensitive to these issues, it will gain strength. And if it gains strength and momentum and some people associated with this group, see it as in their interest to align themselves with that, we are going to have tensions and divisions in the world ahead that are unnecessary and unproductive and may, in fact, result in a substantial deviation from what your expectations are as far as your lives and futures and careers going forward.

Lecture 5
European Advances in Green Energy
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European Advances in Green Energy

If the people who set the prices are the same people who set the production levels, then it's not really a market, and true supply and demand are a farce. David Rothkopf, author of Superclass: The Global Power Elite and the World They are Making, says that Europe is leading the planet in green energy technology thanks to government subsidies, including biofuels and wind energy. Rothkopf is optimistic that the US will eventually adopt these policies toward energy, though our current system is corrupted by nearsighted, pure financial interest.




Transcript



Denmark is doing well as an economy. Sweden has grown at four and a half or 5% for the past couple of years. Denmark gets almost 20% of their power from wind. Sweden has decided that they will be petroleum-free by 2020. Europe is leading on green technology because there has never been a green technology that has successfully taken route without government subsidies and government intervention because that's what's been necessary so forth partially because traditional energy markets - another secret, even though this is being podcast - they're not really markets. It's not a market if the people who set the prices and the people who set the production levels are the same people. The supply and demand thing is thrown out of whack in this thing and they have been able to move their prices to suit their sort of economic hegemony over energy markets for a long time. But Europeans have said, "No. There is a different approach." And they are leading in biofuels, in wind, in next-generation biofuels. They're not suffering from some of the problems that we're having in the United States and so forth. So I think that one of the possibilities is this European model may end up as a resurgent model and could be blended with a Singaporean model, a Chinese model where there is some larger role for the state and there is a different conception about the role of the individual in society, which some people here may go up in arms about. But if you project out these numbers, you have to give that a real shot. Yes, sir? Could you just talk a little bit more about why you think countries in Europe like Germany, for example are so far ahead of us with alternative energy. Besides just government subsidies, what does the U.S. need to do to catch up? First of all, I mean, you say, well, could you please explain this, but eliminate the thing that you think is most important? I mean, you have to have a favorable environment and government subsidies and policies which mandate the use of certain things and penalize the use of other things obviously play a big role on that. I think that can happen in the United States. I think it's going to happen in the United States. You've got three candidates for president right now. All of whom have committed to making climate change a priority and breaking with the policies of the past. The problem is that in the United States, policy is made by a special interest free-for-all that gets us the kind of insane policies like the last energy bill where we set a goal 36 billion barrels of ethanol. Much of which is made with technologies that don't even exist yet and some of which is made with technologies that we know are lousy. And at the same time as we do that and set that impossible goal, we undermine and undercut and eliminate subsidies for wind and solar, which is nuts. So why does that happen? It happens because it's all about a special interest tug-of-war in a system that we have allowed to become operated by and saturated by and corrupted by money.