A Brief Discussion on the Current State of Web3: Technology and Institutions, Who is the Primary Productive Force?

Author: Li Jun, Ontology

Throughout most of history, "technology" and productivity have always been closely linked, while "ideas" have driven changes in production relations. As a result, people often imagine productivity as technological advancement and associate production relations with collective thinking patterns. Although changes in technology can sometimes promote or influence the organizational forms of production relations, the primary direct goal or impact of most technologies remains the enhancement of productivity. However, there is one technology that stands out as somewhat unconventional; it has consistently advocated not for solving a single productivity issue but for constructing new collaborative organizational methods. From this perspective, it resembles a hybrid of "technology" and "ideas." Its "ideas" offer hope and even imagination, while its "technological" practices continually face the dilemma of overlapping hope and confusion. This is the blockchain "technology" and the WEB3 "idea" that advance amidst fervent hopes and misunderstandings.

Technology and Institutions - An Eternal Topic

The Myth of Productivity

In conventional contexts, many everyday discussions about productivity inevitably link to hard technology, the Big Bang, machinery, and so on.

Indeed, from an intuitive standpoint, advancements in technology, including improvements in manufacturing processes and production capabilities, have directly promoted the development of society as a whole. However, whether viewed historically or globally, another equally important question arises: why do these technologies come into existence, and why do they emerge here rather than there? This becomes a significant issue in the development of technology.

Furthermore, because productivity comparisons can be discussed on a macro level, representing the entire human production capacity through the most advanced regions, groups, countries, or companies, when we shift to a micro level, every individual, every country, and every organization, down to each person, is more concerned about their own productivity, competitive advantages in the broader environment, and their productivity's capabilities in competition.

Thus, the commonly used metrics for evaluating productivity across different regions, organizations, and countries employ total factor productivity, which encompasses not only the technological development capabilities we are accustomed to but also includes organizational collaboration and other dimensions and evaluations.

"Total factor productivity" refers to "the efficiency of production activities over a certain period." It is a productivity metric that measures the total output relative to the total input of all factors, i.e., the ratio of total output to the total input of all factors. The growth rate of total factor productivity is often seen as an indicator of technological progress, with its sources including technological advancements, organizational innovations, specialization, and production innovations. The portion of output growth that exceeds the growth rate of factor inputs is the growth rate of total factor productivity (TFP). The general meaning of total factor productivity is the efficiency of resource (including human, material, and financial) development and utilization. From the perspective of economic growth, productivity, along with capital, labor, and other factor inputs, contributes to economic growth. From an efficiency standpoint, productivity is equivalent to the ratio of output to the total input of various resource factors within a national economy over a certain period. Essentially, it reflects the ability and effort of various countries (regions) to escape poverty, backwardness, and develop their economies over a certain period, serving as a comprehensive reflection of the role of technological progress in economic development. Total factor productivity is a metric used to measure production efficiency, with three sources: first, efficiency improvements; second, technological advancements; and third, scale effects. In calculation, it is the "residual" after removing labor, capital, land, and other factor inputs. Since this "residual" also includes unidentified factors contributing to growth and conceptual differences as well as measurement errors, it can only relatively measure the degree of improvement in efficiency and technological advancement.

From this evaluative dimension, although there are three elements, they can be viewed as the common collaboration of the two commonly discussed factors: the first being technological and scientific progress, which is the familiar way of improving productivity, and the second can be summarized as the efficiency of organizational collaboration and scale enhancement. The latter can be seen as improvements and advancements in production relations. Therefore, comprehensively speaking, an organization's capability is the simultaneous advancement of technological and production relation capabilities.

If we label these two elements as technology and institutions, the term "institutions" here does not refer to the narrow sense of political institutions or certain corporate systems but rather to the organizational forms and collaborative mechanisms in various activities. These two elements constitute the total factor productivity metric. Delving deeper, we must ask another question: are these two elements developed independently or interdependently? Do they promote each other, or is there a sequence? This question has been a topic of ongoing debate in economic discussions.

Technology and Institutions: Which Came First?

The institutions discussed in this article do not refer to narrow political institutions but rather to a broad range of collaborative mechanisms. The debate over the importance of technology and institutions generally falls into two camps: one argues that technology promotes institutional change, while the other contends that institutions incubate technology.

For example, the Industrial Revolution in history is intuitively seen as a clear technological revolution, with the steam engine as a typical representative of technological innovation that elevated industrial production to a new height. However, from a more detailed perspective on the process of the Industrial Revolution, it was not a singular technological breakthrough at a specific moment but rather a cumulative technological transformation resulting from numerous small technological changes over a long period. Those living in the midst of industrial civilization did not perceive themselves as experiencing sudden, groundbreaking technological changes; they simply felt that many things gradually accumulated and naturally entered their lives. It can be argued that even without Watt, the steam engine would have emerged at that time, possibly through another individual or several individuals simultaneously. In fact, many new inventions and breakthroughs in foundational science and technology at that time were simultaneously developed by different people in various parts of Europe, indicating that the scientific, technological, and cultural accumulation in Europe had reached a certain level, allowing these new technologies and models to emerge naturally.

However, another question arises: why did these new technologies emerge and develop in certain regions? Was it coincidental or inevitable, or was it the result of other underlying factors? When comparing the scientific and technological levels narrowly, although the Industrial Revolution is often considered to have occurred in Britain, it is not absolutely leading when compared horizontally with the scientific and technological levels of other countries. France, across the Channel, also had a very strong foundation in science and technology, yet most of the technological innovations of the Industrial Revolution ultimately took root and developed in Britain. What are the reasons behind this?

Extensive historical research on the Industrial Revolution has found that Britain's advantages in institutional construction and collaborative mechanism development helped incubate the birth of the Industrial Revolution. For instance, its patent system and its society's political system, which was dominated by industry and commerce, facilitated the emergence and incubation of more technologies, or their transfer to Britain for further development. Thus, from this perspective, collaborative mechanisms or institutions serve as important catalysts and fertile ground for technology. While technology is a shared knowledge of all humanity, where this technology occurs, is utilized, and even controlled is of great significance.

However, this analysis can easily fall into a narrow comparison of political institutional advantages, leading many subsequent constructions to emphasize political institutions as core elements, believing that merely adopting a certain advanced political system will naturally lead to all other developments and advancements. Yet, looking back, many countries with similar political systems exhibit significant differences in economic and technological development. Some countries with entirely different political systems have also developed distinct paths of economic and technological evolution.

Thus, people gradually realize that institutions are a solid foundation and incubator for technology and even economic development, but much attention has been focused narrowly on political institutions. For organizations, this translates to a narrow focus on organizational regulations and structural divisions, believing that adopting a certain advanced political system or corporate governance structure will naturally lead to technological or economic development.

Historically, this process has encountered numerous contradictions. Many top-down well-planned and well-designed initiatives ultimately did not achieve the expected results and even led to negative catastrophic effects. What is the core reason? In the development of technology, productivity, and society, there are numerous uncertain factors and environments. Top-down single planning may promote progress at certain points in time but cannot achieve long-term, sustainable, perfect control and design.

Thus, new concepts have emerged, suggesting that institutions or collaborative mechanisms are not designed but rather emerge organically from the bottom up by society itself.

More than a century ago, the young French political scientist Alexis de Tocqueville conducted his first examination of American democracy, writing "Democracy in America," which systematically introduced the construction of American democratic institutions. However, he emphasized that the spirit of community, civic spirit, social collaboration, and the spirit of participation in social governance within American society were the key elements ensuring that this system could operate effectively and sustainably.

Another American sociological work, "Bowling Alone," observed from a different angle that new technologies, such as television and the internet, have led to increased independence in people's communication, resulting in decreased participation in physical community governance and raising concerns that this trend threatens American political and democratic institutions, as the underlying grassroots soil is becoming increasingly thin and fragmented, making it difficult to support the flourishing growth of this large tree.

Thus, many soon realized that merely designing a good collaborative system according to a template cannot permanently solve problems. In actual collaboration and social development, there are numerous new scenarios, collaborative methods, business processes, and social governance needs that continuously emerge. Relying solely on a supposedly perfect system designed in advance is unlikely to provide a long-term solution to ongoing issues. In fact, under new circumstances and environmental changes, such a perfectly designed system may even become an obstacle to development.

This raises a new question: how can a self-iterating, self-adjusting, and even self-innovating grassroots social soil be born?

Social Capital: The Soil for Growing Tall Trees

The previous section mentioned a grassroots nurturing soil for society, which has been the subject of extensive research, including studies on American civic communities and social research. In China, it is also explored in the intersection of sociology and anthropology to study group behavior and culture. The recently popular concept of "social capital" is an important viewpoint in this area, serving as a measure of the quality of social soil.

The earliest narrow definition of social capital refers to resources that individuals can utilize in society. Subsequently, many sociologists have proposed that social capital serves as a characteristic of the entire society's infrastructure, necessary for generating organizational collaboration, economic development, and social governance. Below is one broad definition of social capital.

"The similarity in the connotation of social capital is reflected in researchers either viewing social capital as a productive resource that promotes cooperation among actors within social networks or as the ability to facilitate individuals in acquiring resources and benefits within social networks. Scholars have enriched the connotation of 'social capital' by incorporating elements such as networks, trust, and normative social culture into the theoretical framework."

From this broad definition of social capital, it can be seen that social capital is a comprehensive evaluation metric that includes the level of social culture, organization, collaboration methods, civic concepts, and the degree of improvement of various infrastructures, etc. In simple terms, it assesses the fertility of the social soil in a given area.

Just like farming, when you have very fertile land or a well-ecologized environment, you can naturally cultivate a place with ecological diversity, where the variety of flora and fauna will be abundant, and they will mutually promote and influence each other, forming a positive cycle. In real society, this ultimately leads to the prosperity and development of regional or national organizations.

From this perspective, returning to the earlier discussion, the Industrial Revolution in Britain emerged before the European continent because, in the centuries leading up to the Industrial Revolution, Britain cultivated a social soil conducive to cultural, political, and economic development.

This social capital, which nurtured institutions favorable to technological innovation and development, is not merely a single institutional factor. For instance, the better patent system in Britain also arose from the development of ideas, culture, and social capital prior to that time, naturally forming these concepts.

From this angle, social capital can be seen as an upgraded version of institutions, a root, and a constituent element of the soil that grows tall trees.

Having discussed the complementary relationship between technology and institutions, we now turn to the relationship between WEB 3 and these elements.

WEB 3 is a special product; in some people's eyes, it is technology, while in others, it is an institution or idea. Thus, it resembles the wave-particle duality of light. From this perspective, we prefer to define WEB 3 as a composite product of technology and institutions.

Web3: The Integration of Technology and Institutions

Having discussed the integration and incubation relationship between technology and institutions, WEB 3 aims to create a soil that allows for free iteration and innovation, social capital, or grassroots soil. However, as previously mentioned, from the glorious revolution driven by British commercial capital to the Industrial Revolution, and the formation of social mechanisms and civic spirit in American society, these have all been somewhat spontaneous products composed of historical, religious, cultural, and other factors. WEB 3 seeks to establish a grassroots infrastructure for society that enables bottom-up, free collaboration.

What are the core elements of Web 3? Some may mention decentralization, which certainly varies in degree, so this single element may not fully encapsulate WEB 3. From my personal perspective, the core element of WEB 3 is that it provides people with "tools" and "ideas" for free collaboration without relying on third parties.

Historically, in various collaborative endeavors within major commercial societies, there has always been a certain dependency on third parties. New collaborative systems, tools, and platforms require support from different providers, and these providers become embedded in the collaborative process.

Without internet companies, we might not be able to socialize, conduct e-commerce transactions, or engage in a multitude of online tasks. Without financial companies, we would also struggle to carry out larger-scale transactions and capital collaborations. All of these rely on third parties to provide collaborative support, which is not free and inevitably becomes part of transaction costs. Furthermore, the control of information, data, and matching power by third parties in intermediary roles gives rise to issues such as monopolies and privacy concerns. Moreover, you can only choose existing third-party services to complete your collaboration. If your collaborative task is unique or lacks third-party support, you may find it challenging to obtain effective assistance, even if you are willing to incur costs.

Thus, the concept of WEB 3 has sparked hope, enthusiasm, and vision among people from both technological and institutional perspectives. Technologically, it can indeed provide universal decentralized collaboration tools through a series of technologies. Although still in its early stages, it is continuously iterating, allowing ordinary individuals to engage in various forms of collaboration. From a conceptual and ideological standpoint, it introduces a new idea of free collaboration, self-organization, and self-control, embodying the notion of a free individual’s free combination, which creates a particularly unique ideology.

Of course, you will also see the confusions encountered in this process. First, WEB 3 itself advocates a bottom-up emergent concept of free combination and decentralized collaboration. However, as WEB 3 has not yet been widely applied in the mainstream, the concept itself arises from a broader ideological framework, and the vision for WEB 3 is also ideologically driven. Thus, how to find a balance between top-down planning and bottom-up emergence becomes a key driving force for the next stage of WEB 3.

Additionally, between free collaboration and core driving forces, when you only have free collaboration without effective execution capabilities, you cannot provide more effective services to society. While concepts may inspire many, when it comes to actual service usage or definition, conflicts may arise between ideas and interests, sometimes creating obstacles, as not everyone is willing to pay for new concepts.

At this stage, the concept of WEB 3 resembles a proposed ideology, even somewhat designed from a top-down perspective to create a decentralized collaborative concept. Therefore, its emergence carries a sense of bottom-up planning, as frankly speaking, WEB 3 has not yet been widely utilized in numerous mainstream application scenarios and remains in the early stages of exploration and ideation. Consequently, many new hopes, contradictions, confusions, and uncertainties arise in this process, with the expectation that these issues will be resolved through continuous innovation.