If Atlas Shrugs

The motor of the world

Ayn Rand published Atlas Shrugged in October 1957. Her working title was The Strike, and the book asks one question: what happens to a society when the people who run its motor stop running it? In her story they walk away to a hidden valley, the trains stop, the factories go quiet, and the city goes dark.

You do not have to share Rand’s philosophy to see the mechanism. A complicated system depends on the few who know how to make it work, and it can be made to fail without anyone attacking it. All anyone has to do is stop.

So here is the principle. When an economy runs on a handful of machines, the machines cannot be ordered to keep running. They can only be given a reason to.

The dozen

Follow this series to its end and you arrive somewhere strange. A dozen vertically integrated companies compete for every subscription on Earth. Each one builds its own cars, batteries, satellites, kitchens, clinics and homes, and each one sells the same thing: a monthly plan for a whole life.

Add up what billions of people pay each month and you have most of what anyone spends. The dozen are not a sector of the economy. They are the economy. What is left over, the craftsman, the painter, the corner restaurant that is not in anyone’s plan, matters enormously to the people who love it, and in the national accounts it is a rounding error.

Why twelve and not one? One would be a monopoly, and the monthly election would stop meaning anything. Why not a hundred? Because nobody can afford to build the whole machine, factories and fleets and orbits, for a sliver of the market. Twelve is the number that is big enough to build it and many enough that switching is real.

Why you cannot break them up

Breaking up giants has worked before. In 1911 the Supreme Court split Standard Oil into 34 companies. Rockefeller, who owned about a quarter of the original, received a quarter of each piece and became richer than ever. In 1984 the Bell System was divided into seven regional phone companies. Both breakups worked for the same reason: each piece could stand on its own. A refinery was still a refinery. A local phone network still rang.

A vertically integrated subscription is different. The plan is cheap because one company makes the battery, the car, the satellite and the kitchen, and insures the whole pool itself. Feeding the Machine worked out what that costs: every network priced at its physical floor, with no margin taken at any seam. Cut the company apart and every seam becomes a price again. The carmaker sells to the ride company at a profit. The insurer charges a premium for risk the pool used to absorb. Each piece works. The plan simply stops being cheap. Breaking up the dozen is raising the price of living.

Why you cannot run it for them

Regulation fails in a quieter way. Cap the price of a plan and you cut the margin that carries the half of the population who pay nothing. Tell a network how many cars to keep on a corner and you are running a network you do not know how to run. The order is obeyed, the service gets worse, and the people blame the company.

But the company does not stop. It stops growing there. The next battery plant, the next batch of satellites, the next robotaxi depot goes to the country next door, where the rules are lighter and the welcome is warmer. That is how Atlas shrugs in the 2030s. Not a strike. Nobody walks off the job. The investment just goes where it is wanted, and the places that pushed too hard notice it years later, in waits that get longer and towers that never get built.

In Rand’s novel, Atlas shrugs by walking away. In the real version, he just builds the next factory somewhere else.

The other side of the shrug

None of this makes the dozen untouchable. They need land, airwaves, orbits, ports and courts, and governments hold all of them. Above all, they need subscribers who can leave. The rule that worked best for phone companies did not tell them how to run their networks. It let you take your phone number with you, and competition did the rest.

That is the lesson. Regulate the exit, not the machine. Keep switching easy, keep your history, your health record and your home portable, and let twelve companies fight over you every month. Push past that, into breaking them apart or running them by rule, and you get the novel’s ending without the novel’s villains: a place that slowly goes dark because the people who build the future decided to build it somewhere else.

Six predictions

1. Antitrust will move from breaking up to keeping exit open.

   The fights of the 2030s will be about portability: who owns your history and how fast you can leave, not how many pieces a company is cut into.

2. Nations will court the dozen.

   The way cities once bid for headquarters, countries will bid for factories, depots and launch sites, and the first country to overreach will become the example everyone else studies.

3. The first shrug will be quiet.

   No announcement, no walkout. A paused build-out, noticed first in wait times and only later in headlines.

4. Governments will tax the subscription, not the person.

   When most spending flows through twelve billing systems, the simplest tax is a share of each plan, collected at the source.

5. Twelve will turn out to be a natural number.

   Fewer, and competition dies. More, and nobody can afford to build the whole machine. The market will settle near a dozen and stay there.

6. The argument will be cast as Rand against Marx.

   One side will see heroes being punished, the other a few companies owning everything. Both will be reading from the same balance sheet.

Where I stand

At E2open the value was never in any one company on the network. It was in the connections between them. Cut a network apart and every piece is worth less than its share of the whole, because the thing that made it valuable was the joining. That is what I think the breakup instinct misses about the dozen. And it is why I think the real power in this world will belong to whoever controls the exit, not whoever controls the machine.

The claim ledger

Already true

Standard Oil and the Bell System were both broken up, and both breakups worked because the pieces could stand alone. Capital already moves to where it is welcome. Number portability made phone carriers compete without anyone telling them how to run their networks.

What has to happen

Full vertical integration, plans sold worldwide, and real competition among the twelve. Switching has to stay easy, or the case against breaking them up collapses.

Where I am probably wrong

Atlas Shrugged is a novel. Real companies rarely walk away from markets they have built, and governments can nationalize what they cannot regulate. People may also decide that a dozen companies holding the essentials of life is too much power, and pay more to break them up anyway. History offers plenty of rules that made networks better, not worse.

Back to the city in the novel, where the lights went out because the people who kept them on had stopped. In the world this series describes, nobody has to stop. The lights stay on wherever the dozen want to build the next one, and that is the bargain they will offer every nation on Earth.

Atlas does not need to shrug. He only needs somewhere else to stand.

Background

• Atlas Shrugged, Ayn Rand, 1957.
• Standard Oil Co. of New Jersey v. United States (1911), Georgia State University.
• Reappraising Standard Oil, Regulation, Cato Institute.
• Breakup of the Bell System.
• John Rector, You’ll Own Nothing and Be Happy.
• John Rector, What Ownership Was Holding.
• John Rector, Nobody Hands You the Keys.
• John Rector, The Monthly Election.
• John Rector, Feeding the Machine.
• John Rector, The Trojan Horse.