Musings on the separation of business domains

There are some serious problems with the fairness of standardised school tests in some states in the USA. The probem occurs because the same corporations both produce the standardised tests and sell the text books. This gives the companies an incentive to make sure you have an advantage if you buy their book (and therefore a disadvantage if you don’t), and a further incentive to change the test each year - so people buy more books.

It occurs to me that the same problem exists within many areas of capitalism. The social benefit produced by competition falls down when a company has control over two codependent domains. It’s a core principle in the recent Net Neutrality debate - ISPs shouldn’t be allowed to sell priority to online service providers as well as selling internet connections to the public - it’ll be bad for competition and for the public’s access to online services. ISPs should have the specific task of providing the utility of an internet connection. Another great example is the separation of investment banking from personal savings to prevent people’s savings being exposed to too much risk.

The problem is most obvious in the financial interests of politicians - who shouldn’t be allowed to benefit, directly or indirectly, from any of the effects of the policies they enact, but often do. But it occurs to me that there should be some guiding principle to make sure this separation of interests is preserved throughout companies too.

Just as companies shouldn’t be allowed to grow too big, they also shouldn’t be allowed to control related domains. I believe this was the idea behind the royal charter, which is a license to operate an organisation within a specific domain.

However, this is far easier said than done. With the pace of change in the modern world, legislation could never keep up with all the new industries that are being created, and their evolving interrelations. And even if they could, people in similar industries always socialise together and create cronyistic relationships.

I suspect the only real solution is the most difficult - to engender a social conscience within organisations. Make it profitable, or at least morally beneficial, to create small, focussed organisations, that do one thing very well and take pride in it. I think this could potentially be achieved through thousands of small changes to benefit the small organisation. Like Net Neutrality, each piece of legislation that makes it harder to make a quick buck without producing real social value is a step in the right direction, and a guard against sprawling, exploitative corporations.

By @nottrobin