Legal evolution

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References

Originally published in 1976, Richard Dawkins’ neo-Darwininst classic The Selfish Gene advanced the striking argument that genes are the basic unit of evolution, not individual organisms or species that host them. Genes are naturally “selfish”, having only the goal of their own survival and replication, using their host organisms as vehicles for their own survival. This came as a surprise and disappointment to many intelligent, self-respecting humans, who hitherto had rather liked to think they were in control of their own destinies.

Richard Dawkins is famously dismissive of the idea that natural selection works at higher organic levels, but the philosopher Daniel Dennett made a compelling case that, at least as a metaphor, “Darwin’s Dangerous Idea” explains a lot about how complex decentralised systems of any kind work.

How well does Darwin’s dangerous idea explain corporations? Jurisprudence tells us that a corporation is a legal person with its own independent existence as a res legalis, with rights and duties independent of its directors, offices, servants and shareholders. We take it for granted that the firm, and the natural people engaged on its behalf, acts in the firm’s own best interest, as independently stated.

But at the same time, a firm’s behaviour does not emanates not from “the firm” itself. It cannot: a firm is not, at least at an abstraction level we can understand, conscious. It is a vessel. Being an inert collection of papers — not even paper anymore: these days a company is a string of symbols embedded in an electronic registry on a government database.

This lends the corporation to the genetic metaphor. Whereas we humans feel like we have our own consciousness, and we chafe at the idea that we are motivated by mindless replicating genes, this does not seem odd for a corporation at all. It can’t propel itself, so how else could it act than through its agents?

Might we call this unit of replication an “agene”? But “agent” will do.

A biological organism, like homo sapiens, is something we intuitively understand, because it’s us, while genes are these weird, double-helix, perplexing, moral-agency denying things. In a corporation it is the other way around. The agent is the thing we know, because it’s us, and the “firm” is this ineffably weird thing we can’t quite comprehend.

And it is weird. The concept of a corporation is deeply weird. We don’t spend enough time thinking about just how weird it is.

This is a wholly imaginary, fictive concept. A firm no more “exists” than does Hary Poter – courtesy of a collective conviction that it is there, has independent, continuous existence, rights, obligations, can sue and be sued — that it makes sense in our world.

But it’s even weirder than Hary Poter. His “realness” has limits we instinctively understand. The boy wizard can’t sue. The fact he’s made-up is ever-present, close to the surface; static enough a fact that we don’t forget it and it doesn’t surprise us. We all know Hary is made up. We don’t send him birthday cards, expect to bump into him on the tube or expect him to moralise about gender identity. No-one would find the statement, “Hary Poter doesn’t exist” odd. Even though, obviously, Hary Poter does exist: he has properties. We have enough clarity about him to for there to be true or false beliefs about such minutiae as where his uncle and aunt live, his pet owl’s name and the shape of the scar on his forehead.

But the fiction of the corporation is so deeply interred that we forget, or don’t even know, that corporations are made up. It isn’t apparent to the typical, er, muggle, just how bizarre an idea the corporation really is.

Non-specialist might be surprised to find out that a corporation isn’t a real thing, that it really is no more than a state-sanctioned metaphor for continuously fluctuating, indeterminate bunch of people. A bunch that is neither static, nor uniform (shareholders, employees of differing seniority, contractors), nor necessarily natural (some of a corporation’s agents might themselves be corporations) nor is it even obvious where, or even when, the boundaries of this bunch of agents that comprise a given corporation start or finish. Contractors? Affiliates? Contractors of affiliates? Joint ventures? Professional advisers and fiduciaries? Service providers? Is an permanent employee, when walking her dog at the weekend, part of the corporation? Says who?

So who or what a corporation comprises, and how it operates, and when, are difficult questions, especially as they keep changing — yet we persist with our delusion that “the corporation” is somehow a sensible thing to deserving independent moral agency notwithstanding the provable moral variety of its agents.

The corporation is a deeply weird thing to regard as a commonplace.

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The selfish agene

with that, let’s return to Richard Dawkins’ clever metaphor from the physical sciences: the selfish gene. If genes are to organisms as agents are to firms, the “firm” is no more in charge of its destiny than we are in charge of our genes.

In natural selection the fundamental unit of replication drives survival and evolution. It determines the critical path. In the corporate realm, that fundamental unit of replication, interested only in its own longevity and propagation, is the agent.

The agents’ hands rock the cradle. They push the glass round the ouija board. This ought to be a clearer example even than actual genes which, once, er, incorporated into a body host, seem enslaved by it. They are stuck there. Their only way out is through replication into their host’s progeny.

But agenes are, well — free agents — they can and do leave one host firm and join another, absorbing and transplanting “culture” as they go. When you hire Goldman staff — so you hope — you graft on some of Goldman’s culture as you go.

The firm has the quality of Theseus’ ship. (Goldman’s partnership has an average life of about 4 years)

When a firm acts, what really happens is that its agents act, motivated by the agents’ interests. They will be common with the company’s to some extent but not perfectly. The dominating interest is self-protection. Encapsulated by the old saw

No-one got fired for hiring IBM.

Apply this principle to ongoing conundrums in corporate space and they fall away:

Why is change management so hard?

Why do lawyers write in legalese?

Why does the cost of doing a deal scale with the size of the deal?

Theoretical types and market fundamentalists will throw up their hands in despair at this: “but surely, they will say, the regulating influence of the free market will eradicate this behaviour.”

It might, if it were a free market, with perfect information, zero friction, and no vested interests. But that would entail firms themselves being unguided free markets propelled by Adam Smith’s invisible hand. But no firms are run like that.3 But agent self-preservation is the negating counterpoint to the invisible hand: it is sexual selection that negates natural selection.

This is true whether the action takes place within a firm or between firms. (it is just more obvious within them).

Just as biological persons are emergent properties of their genes, and social persons of their memes — our biology and our culture owns us, and not vice versa — so are firms emergent properties of their agents. A kind of extended phenotype. Agents may say they are protecting the firm’s franchise — the less inquisitive may even believe it — but only as a second order priority. This is an extension of the buttocractic oath. First, protect thyself.

Talking, therefore, in terms of the “firm’s franchise” leads us to presume a happy state of affairs wherein a servant firm, motivated by the financial advancement of its shareholders, interacts with its client firms in the sole interests of these imaginary, emergent super collectives resulting in a sort of saintly, magic efficiency.

This is the domain of the invisible hand, after all — mysteriously steering selfish merchants towards each other’s common good.

We may point to regular cost cutting initiatives wherein agents seen as surplus to requirements are unceremoniously ejected from the organisation, but even these are one agent’s acts against another, in the selfish cause of one’s own longevity. (For those who find this a bit cynical I am happy to hear examples of those running a RIF declaring themselves redundant, at least without a better offer).

But when agents intervene on behalf of their hosts — as they absolutely must — that effect is adulterated, for the best interests of its own firm, let alone the firm’s client, is a second order priority. What that agent wants is enough to do, to be handsomely paid, and to go home.

Hence the colossal boon of scale. Over a certain size a single merchant cannot achieve more without leverage, in the form of her own servants, engaged to do her bidding. When scale gets so great we see that model replicate, as if fractally: the single corporation subdivides itself, and engages other companies to undertake its own fundamental operation — other companies which themselves have engaged agents, and even outsourced its own functions to other corporations.

We draw from this also a refinement of Parkinson’s law: let us call it Büchstein’s law, or the eighteenth law of worker entropy:

The JC’s eighteenth law of worker entropy, also known as Büchstein’s special theory of Parkinson’s Law, states that:

“work does not expand to fit the time available, but the amount of money available.”

Since, as Benjamin Franklin told us, “time is money” this is no more than a restatement of Parkinson’s law: there is a steady relationship —“commercialogical constant” — between the amount of money at stake and the amount of money agents will be able to extract, risk-free, from the principals by convincing them they can help ensure its safe conveyance.

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Here’s how evolution works in a legal context. Lawyers are like genes. They are mindless replicating engines. It is what they do: they spawn. They combine to create contracts. The contracts have variations in them. Good contracts that are fit for a given purpose will replicate more easily than bad ones that are not. They will evolve, not towards a perfect golden mean, but away from the imperfect, gerrymandered place in which we find ourselves today, and into the imperfect, gerrymandered one we’ll be in tomorrow. Can’t wait. Can you?

The contract is a phenotype; a vehicle for replicating its genes, the selfish lawyers. The contract is not a replicator in itself. The best kind of contract will generate lots of little places for lawyers to secrete themselves away, snuggling into the toasty folds of flannel; laying elaborate nests of relative clauses; secreting their sticky roe on its boilerplate; fecundly feeding on all those juicy words.

The lawyers will contribute to their host, spewing out without limitations, for the avoidances of doubt — each of which other little attorneys can leap into and munch away on — all the time chewing up and recycling the words that no one else — other than another legal replicator — will ever read or understand, much less, once they are written and filed, care about.

See also

• Evolution

To the extent firms have a persistent “culture” — and they do: Barclays is different from UBS is different from Goldman — they are an emergent property of the behaviour over time of its agents. Continuity comes because incoming agents are enculturated, imprinted, and take some of that with them wherever they go. (Our culture owns us: we do not own it.)