Carnegie’s point is a direct, if unintentional, refutation of one of the fundamental tenets of marxism, i.e., that ownership of the means of production is all important, when those “means” are plants, land, or facilities of some kind.

The mind is the only “means of production”.

Let an entrepeneur freely assemble the right collection of minds, and organize their efforts, and you have as a result the dynamic phases of such organizations as GE or IBM or Ford, or any of the tech based powers that exploded out of the computer revolution while they were inventing it.

What the collective vision can never seem to grasp is that the creative energy that drives innovation, and the development of improvements and advances in any field, is a totally voluntary, internally motivated force that cannot be chained to political servitude and ordered about like a servant.

Secondly, part of the process you are describing, as I understand it, is the loss of the hands-on artisan who brought a wealth of practical experience to those judgement calls that so often leave the unknowledgeble and inexperienced shaking their heads in wonder. But part of the genius of capitalism and technology is the increasing value placed on the intellect, while numerous substitutes are found for the physical elements of work.

The laser guided and computer controlled robots which now dominate assembly lines are the perfect example. For decades, those claiming to be defenders of labor condemned the assembly lines as being inhuman and cruel. Now that further innovation has reduced the human component, as it has in so many ares of physical work, these same innovations are condemned for costing workers these valuable and necessary jobs.

Since its introduction, the capitalist system has consistently moved from human muscle to hman mind with artificial muscle to do the work. It is odd to see a system that so consistently raises human beings from mule to mule skinner be so constantly criticized for doing something wrong by the very self-appointed defenders of the common man who then applaud any collectivist that takes an entire population and yokes it to a communal plow.

Far too many people have been led to believe that capitalism and free markets are about rich people and big corporations. This is untrue, and I have little interest in either.

The point of economic freedom is that it allows the free operation of two critical human faculties—the mind to create, and the will to choose.

• Experience based knowledge will always be with us. From the sales ladies at Sears who always knew to tell my mother when a sale was coming or to keep some piece of clothes for me under their cash register in response to my mother’s request to a line worker that developed a trick that made his job easier; they bypassed the normal and expected procedures that the persons who created the way of doing things never thought of. These are not the knowledge workers I think of when I read most of the current writings on the knowledge economy today but are no less valid.

• You can’t segregate knowledge from the rest of being human. Having work on the assembly line, I never shut off my thoughts of what I was doing because of that. Those persons around me who did so were dangerous.

• Fordism was not the only thing defining the so called old economy. In 1913, Ford established the Sociological Department which was put in charge of administering the program and investigating the home lives of workers: “investigators from the Sociological Department visited workers’ homes and suggested ways to achieve the company’s standards for ‘better morals,’ sanitary living conditions, and ‘habits of thrift and saving’.” [ref: http://www.purselipsquarejaw.org/2004/01/ford-sociological-department.php. I put it to you that the existing knowledge economy has its own version of that in the existence and actions of organizations such as ISO and IEEE among others.

I’m not too sure that applies to our current age. Re. “markets” consider the recent housing/credit/TARP debacle. “Science” has offered up the junk science of global warming. Our leaders don’t have ability to imagine, much lest implement, a rational market with respect to health care. Certainly the last couple of centuries has seen progress but currently the trend appears to be generally regressive.

There are parts of culture that evolve continuously in a general direction of “better.” Science, technology, markets come to mind. In those domains of human activity, we experience a cumulative progressive advance over time. But in politics, art, etc., it’s a case of plus ca change, plus ca reste le meme chose.

To say that today’s companies and today’s economies are different because the value they produce derives much more from the people within them than heretofore is to state something that is simply false. It’s always been the people.

There are parts of culture that evolve continuously in a general direction of “better.” Science, technology, markets come to mind. In those subsections of general human activity, we experience a cumulative progressive advance over time. But in politics, art, etc., it’s a case of plus ca change, plus ca reste le meme chose.

Zen said: “Outside consultants or specialists charge far more to come in and fix a problem, than an old hand on the payroll who would fix problems ( or at least diagnose it) as part of his per diem rate.” Zen you are spot on, however there is the pesky wisdom of Jesus: “A prophet is not without honor except in his hometown and in his own household.” I am a consultant by profession and I have yet to visit a client where I did not find multiple people who “knew” the solution(s) but did not have “standing” because…I read a lose Tom Peters quote recently from his seminal In Search of Excellence: “people come to work everyday with a gripe, the trick is to listen, learn and improve…”

Awareness of the tacit and explicit is vital if we are to have integrity in our vision; only then can we appreciate the power of thought and knowledge.

“What is probably is to say is that–across the economy–tacit, experience-based knowledge has tended to be replaced by theoretically-derived knowledge”

It is cheaper, on average, to do so – as long as everything is going “right”. Lacking access to that tacit knowledge can be very costly when something went wrong and independent, intuitive, problem solving and initiative is required. Outside consultants or specialists charge far more to come in and fix a problem, than an old hand on the payroll who would fix problems ( or at least diagnose it) as part of his per diem rate.

But, there has been a tangential issue on my mind for some time, and I was delighted to see Jim Bennett bring it up with the very example I was going to ask about:

Moby Dick had some interesting discussions about the various shares of the profits that the different positions on a whaling ship would get; harpooners had a far higher share than ordinary seamen.

Readers may remember this case: when Ishmael and Queequeg are signing aboard the Pequod, the payment they will receive for their work is specified in terms of a fixed percentage of the voyage’s profits:

I was already aware that in the whaling business they paid no wages; but all hands, including the captain, received certain shares of the profits called lays, and that these lays were proportioned to the degree of importance pertaining to the respective duties of the ship’s company. I was also aware that being a green hand at whaling, my own lay would not be very large; but considering that I was used to the sea, could steer a ship, splice a rope, and all that, I made no doubt that from all I had heard I should be offered at least the 275th lay–that is, the 275th part of the clear net proceeds of the voyage, whatever that might eventually amount to. And though the 275th lay was what they call a rather long lay, yet it was better than nothing; and if we had a lucky voyage, might pretty nearly pay for the clothing I would wear out on it, not to speak of my three years’ beef and board, for which I would not have to pay one stiver.

So I have wanted to ask two questions for some time now (and in your answers keep in mind that I’m economically ignorant):

(1) Is there a specific technical name for this type of payment system in economics, so that if I wanted to find commentaries on it I could do so more easily? It this the same as “partage”?

(2) Why wouldn’t a system more or less like this be a good one for non-profit organizations in particular? (I focus on them because that’s always been my primary habitat.) If universities, for example, paid people a percentage of revenue each year, then when the economy collapses, as it has recently, everyone’s salary drops by exactly the amount needed to cover the loss in revenue. If that causes some people to choose to leave, fine, but it would prevent forced layoffs. Is this a sound idea or a loony idea? (I suspect the reason it isn’t done is that the folks with the decision-making power prefer to implement layoffs since it harms them less.)

Is this “lay” or “partage” system commonly used in any fields or industries today as a mean to calculate regular salaries?

I forget who said it but I was told that any given company’s fortunes generally rest on 20-30 people who work there. These are the people with the most knowledge and talent and they really drive the company. There are many more who make meaningful contributions but these are the people without whom the enterprise would not function as it does. I suspect that’s probably been true for more than one hundred years. And in many ways it’s the success of these companies – the team work of these knowledgable employees – that drives progress in society.

Of course this isn’t limited to the corporate realm. Linus Torvalds (along with Alan Cox, Dave Miller, and many others) have shown that a few individuals with the right talents, along with countless skillful helpers, can achieve a lot.