Esko Kilpi on Interactive Value Creation


Not firms but commons and market networks




In the network economy, individuals, interacting voluntarily with each other by utilizing the new platforms/apps and relatively cheap mobile devices they own themselves, can create value, and, even more importantly, utilize resources and available “excess capacity” as Robin Chase calls it, in a much more sustainable way than was possible during the industrial era.
















Collaborative and Competitive Creativity









Like Henri Matisse and Pablo Picasso.


Thank you Simon Schama

Are markets the future of firms?

Amazon has joined Uber, Lyft and many others in redrawing the lines between independent contractors and employees. On March 30th Amazon announced an expansion into the “on-demand” economy. Amazon Home Services is a service marketplace that connects customers with builders, plumbers, cleaners and even teachers. Amazon has successfully made it very easy to buy books and goods. It now plans to do the same for professional services. It does so through (1) standardizing offerings so that prices can be agreed in advance, through (2) promising that the workers are trustworthy. Amazon scrutinizes workers through searches, interviews and reference checks and (3) providing a great interface experience for employers to a world that is very cumbersome: one-click hiring of workers and easy payments through Amazon.

Businesses are concluding more and more often that there are no reasons why certain activities should be performed by employees rather than contractors. The skills of these workers are seen as generic, making it easy for non-permanent workers to fit in quickly. This has created the Internet-based service platforms, the new job markets and the huge trend of on-demand work.

But hold on. A firm is essentially about creating long-term contracts when short-term contracts are too costly, or don’t make sense for other reasons. So is there a place for long-term contracts in the world of the Internet and these new markets? Is there a role for the firm, as we have known it?

One way to understand a firm is as a contracting mechanism between providers of financial capital (the principals) and managers (the agents). Principal-agent models are still extremely influential in corporate governance and  in reality continue to form the basis of mainstream compensation structures up to this day. In principal-agent thinking, employees are viewed as generic labor and agents for the managers. The managers are understood as having firm-specific skills and are viewed as agents of the shareholders.

The economist Brian Arthur from the Santa Fe Institute argues that the ever-increasing role of knowledge in value creation makes the foundations of economics and our thinking around firms badly outdated. Likewise, Peter Drucker predicted that “knowledge may come to occupy the place in the society which property occupied over the last three centuries.” As early as 1964 Gary Becker coined the term “human capital” to refer to the fact that many of the skills and knowledge required to do knowledge work could only be acquired if “some investment was made in time and resources”.

In his seminal work, Becker also considered the implications of the fact that some of the knowledge and skills acquired by employees have a much higher value in some relationships, some contexts, than they do in others. The labor services of employees with specialized skills thus cannot be modeled as undifferentiated generic market inputs, for which wages and quantity, the number of people, and the number of hours of work are determined. With context-specific human capital, the creativity and productivity of a particular individual depends on being part of a particular group of people engaged in particular assignments. Knowledge work is relation-specific and contextual.

More importantly, once acquired, knowledge and skills that are specialized are assets that are at risk following the very same logic as that by which financial assets are at risk. In practice, this would mean that knowledge workers should explicitly bear the long-term entrepreneurial accountability for the success or failure of the company, and additionally benefit from any possible upside, just as shareholders do today. From the point of view of corporate governance, it would mean that companies should be run in the interests of all their investors.

In firms where employees embody the critical capabilities, they must be encouraged to make creative decisions about how to act, interact, learn and innovate. One way to do that is to give them sufficient claims on the long-term returns, in other words to give them ownership rights and responsibilities.

The puzzling thing about the on-demand trend is that when it comes to actual work practices, there is really nothing new despite the powerful technologies and great new interfaces. It is a replication of the industrial model that separated labor, management and shareholders. If we believe Gary Becker, the big societal problem we are about to face is that on-demand work limits the value potential of human effort.

But there is an alternative conceptualization. Knowledge work is defined as creative work we do in interaction. The price of technology is going down rapidly and the cost of starting a company has decreased dramatically. These trends give knowledge workers more power relative to employers. If knowledge is more important than money, it gives human capital more power relative to financial capital, potentially changing the concept of the corporation.

The future of capitalism depends on whether firms create a much larger number of capitalists than they do today. Everybody will benefit if, in the future, a larger number of workers think like owners and act like long-term investors. A sense of ownership could be and should be the difference between firms and markets.

We should use the Internet to create the new, not to repeat the old.

The future of jobs: not being an employee, but not quite like being a contractor either

Just as industrial society became a society of corporations, it developed into a society of employers and employees. These were two different ways of looking at the same phenomenon, jobs. Almost all economic theories have made, and still make, the same assumption: the employer — employee relationship is necessary to create jobs. We have taken that relationship as given.

Traditional management thinking sets employee goals and business goals against each other. The manager is free to choose the goals, but the employee is only free to follow or not to follow the given goals. This is why employee advocates mainly want responsible firms, nothing else, and the management of those firms wants skilled employees who do what they are told, nothing else.

The other assumption that is taken for granted is that it is the independentemployer/manager who exercises freedom of choice in choosing the goals and designing the rules that the members of the organization are to follow. The employees of the organization are not seen as being autonomous, with a choice of their own, but are seen as rule-following, dependent, entities. People are not really people, but resources.


We should ask whether the current social construct of jobs is inevitable, or whether it is a social artefact that is over 100 years old, and should be redesigned.

Industrial workers used to do as they were told. This now creates a systemic inefficiency. Today, knowledge workers should negotiate solutions in active interaction with their peers. We also used to think that organizations outlived workers. The organization came first, and people served the organization. Today, workers’ careers outlive organizations, profoundly challenging our thinking.

We need a new agenda connecting people and businesses. The aim should not be a set of shared goals, but complementary goals and a co-created narrative for both.

We need to study the intersection of corporate strategy and personal narrative. Work needs whole human beings. People who are more fully present, people with responsibility and ownership.

This is where the biggest changes are taking place in the world of work. Instead of the industrial era’s generalizations and abstractions about what skills everybody should have, or what steps everybody should take, it is now time to cultivate a deep understanding of the context, the unique, particular situation you are in. Who are you and where do you come from? What kind of relations are the building blocks of your life?

Reflecting on your reality should be the starting point of any effort to find a job or to create work. Unfortunately, this is where we are often at our weakest. It did not matter in the past because most decisions were made for us. But now people can, and must, choose. Companies are not managing their employees’ long-term careers any more. Workers must be their own HRD professionals. With opportunity comes new responsibility. It is up to the worker to construct the narrative of (working) life, to know what to contribute, when to change course, and how to keep engaged  for much longer than we have been used to. It may be a life that is not quite like being an employee, but not quite like being a contractor either. To make the right decisions, you have to develop a new understanding of yourself and what you are actually up to in life.

The new task is to choose work commitments on the basis of our own particular strengths and our own sense of purpose and belonging, not just on having some free time and wanting to earn some extra money for Uber. That is not what being independent, being your own boss, really means.

We are accustomed to taking work home, but what would the opposite be? Perhaps following your unique intentions, hopes, and wishes for the future, in everything you do? Instead of thinking about what employers want, you’re better off conceiving a match between what you want and what customers want.

Disrupting Unemployment







Tor Arne








Thank you Katri Saarikivi

Work in the Machine Age  –  Humans Need to Apply







Work has been designed as a very, very simple game.






Men and machines

I took part in a meeting on technological intelligence and the future of work. One of the questions raised was: “If machines can replace people’s minds in knowledge work as effectively as machines replaced their muscles in manual work, what will ultimately be left for human beings to do? Are we going to run out of jobs?” My answer was that this concern is based on a totally incorrect assumption. Working life does not consist of a finite number of things to which the human mind and human effort can be applied.

The challenges that confront us every day are unlimited. Every solution to a problem generates several new problems and unforeseen opportunities. No matter how many are solved, there will always be an infinite number ahead of us. Although modern technology has reduced the number of things that in the past had to be dealt with by human beings, it increases the complexity of the challenges that require human attention now and in the future.

Technology: robotics, machine intelligence and cognitive computing do change what people should be doing and how organizations come to be what they are. This is why we need to revisit and rethink our conceptualizations of work.

When the Industrial Revolution began, the dominant Newtonian worldview meant that there were no significant uncertainties, or unknowns, messing things up. Physical laws described what things, following a linear, rational causality, would do. Most academic experiments were constructed accordingly, and still are today. The aim was often to study the effect of one known variable on another.

Business enterprises were consequently thought of as algorithmic processes, as machines. Enterprises conceptualized as machines, like all machines, didn’t have a will of their own. They served the intentions of their creator, the owner. Employees were, of course, known to be human beings, but their personal intentions were seen as irrelevant. People were retained as long as they were needed to fulfill the intentions of the creators.

The systemic and biological conceptualization then replaced the notion of an enterprise as a machine. One often overlooked reason for this was the changing structure of ownership. When a firm went public, its creator disappeared. Owners were seen as anonymous, and too numerous to be reachable. The Industrial Revolution turned into the Managerial Revolution we are still living through today.

The Managerial Revolution changed the thinking around the purpose of the firm. Like any biological entity, the enterprise now had fitness and longevity as raisons d’être of its very own. Profit came to be thought of as a means, not an end in itself. Success came to be measured by growth. It was seen as essential, just like in nature.

The systemic view was a profound change in thinking compared with the mechanistic view. A biological organism is not goal-oriented in the sense of serving external purposes or moving towards an external goal. The movement is toward a more fit or more mature form of itself in a particular environment. An organism can adapt, but cannot leave or choose to be something else.

But humans are creative and humans can choose and you never know what they will do next.

This is why things are changing again. The sciences of uncertainty and complexity have helped us to understand that organizations are patterns of interaction between human beings. These patterns emerge in the interplay of the intentions, choices and actions of absolutely all the parties involved. No one party can plan or control the interplay of these intentions. But even without being able to plan exact outcomes, or control what others do, people can accomplish great things together.

The thing is that people can only accomplish their work in the necessarily uncertain and ambiguous conditions through ongoing conversations with each other. Work is negotiation. This is why the next revolution is dawning.

The social revolution, the human-centric revolution, is about deeply rethinking the value of human effort. An increase in value can only occur if people can do something in interaction that they cannot do alone. Social business may be more about complementarity and coordination than collaboration.

An enterprise that is conceptualized as a social business, should (1) serve the purposes, the will, of all its constituents. It should (2) enable its parts to participate in the selection of both the ends and the means that are relevant to them personally. If the parts of a system are (3) treated as purposeful, they must (4) have the freedom to choose and to act, not independently, but interdependently. This is because the basic unit of work is (5) interaction between interdependent people.

This means that the defining characteristic of a social business is the increased, non-algorithmic, variety of behaviors that is available. It is not necessarily about common goals or shared purposes any more. It is a common movement of thought that always surprises us.

The way our organizations are conceptualized has a great effect on what people do, and what they do affects the way organizations are conceptualized. Enterprises have always consisted of people who have ideas, intentions and a will of their own. Now it really matters. All people can be creators. All people are creators!

This, in the end, is what makes people different from machines.

Christmas Letter








Industrial work clearly predetermined the tasks that had to be done. The technology, the machine and the ways to work with the machine were given. Creative work is very different. The first thing for a worker is to answer the questions: What am I here for? What should I achieve? What should I do next? Key questions for a creative worker have to do with how to do things and what tools to use.

Historians claim that the invention of the printing press led to a society of readers, not a society of writers despite the huge potential of the new technology. Access to printing presses was a much, much harder and more expensive thing than access to books. Broadcasting systems such as radio, newspapers and television continued the same pattern. People were not active producers, but passive receivers.

Computer literacy still often follows the same model. In practice it means the capability to use the given tools of a modern workplace. But literacy to just use, to be the consumer of, the technologies and the programs is not what we need. The perspective of the consumer/user was the perspective of the industrial age. That should not be the goal today.

In creative work the machines necessarily have to serve the workers. It is the workers who decide what to do next and how to do it. In the digital world, it is not enough if we know how to use the programs, if we don’t know how to make them.

The underlying capability of the creative era is programming to utilize technological intelligence. It is a change from using things to making things. Creating things for yourself and sharing them. Today the code is the main domain of creativity and innovations. It is a new language and the number one high leverage activity in the digital society.



The really big idea is to reconfigure agency in a way that brings these relationships into the centre. The task is to see action within complex human relationships supported by our relationship with algorithmic technological intelligence.

In 2015 it is time for “Advanced Work”!


More on the subject: “We need to improve the interaction between humans with the support of machine learning

Designing change















From jobs to tasks and from the value chain to the Internet












But many things need to change!













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