The Invisible Hand Can Be Seen

Back in my University days I took quite a number of economics courses.  One of the first books most  economics students read in those days (and maybe still do) was Scottish economist Adam Smith’s Wealth of Nations originally published in 1776.  I enjoyed that book immensely and thought it gave a great explanation of how an economic system was driven by individuals.  One key premise that Smith built his economic treatise on he dubbed  “The Invisible Hand.”

“The Invisible Hand,” was a great metaphor for how markets used to work.  The basic premise was that in free-markets, individuals, driven by their own-self interest, will act in a way that ultimately maximizes the wealth of a community.  “The invisible hand” will guide each in a way that ensures that by maximizing their own self-interest society as a whole gains the most.  Individuals neither intend to promote the public interest, nor do they even know that they are doing so, yet they do, by trying to maximize their own lot in life.

We know much more about economics today than we did in Smith’s time (yet we still manage to screw it up), however this is not my point here.  I believe that “The Invisible Hand” can now be seen in a way that it has never been visible before.  I was first excited by the Internet and what it initially did to reduce friction on economic activity.  Now, along come social networking tools, and I think they are in the process of severing the invisible hand.  For if you are listen to the social media/net world, it is easy to hear discussions that lay out market direction, before the market actually move.

Honest dialog is occurring about products, companies, politics, ideas, movements, organizations, events and tribes (to use Seth Godin’s metaphor).  People may still operate in their own self-interest, but communicate about it in a rare and extended way that distributes that which is of value to society at lightning speed.  So, self-interest that is self-serving is self-destructive in an unprecedented way.  We are at the dawn of the social network era (think Internet 1995) the basic social networking tools of today, blogs, wiki's, photo sharing, etc along with popular commercial resources (Twitter, LinkedIn, Facebook, Plurk, etc) are empowering people to help each other in ways that are extremely transparent and would have been impossible in the past. 

If you are in the conversation, you know what I mean.  If not, be prepared to wake up some day by being slapped in the face by a very visible hand that you just haven’t been looking at.