Ibn Khaldun on the Rise and Decline of Corporate Empires

Tuesday, August 27th, 2013

It should come as no surprise that Paul Krugman, fan of Asimov’s Foundation novels, has become a fan of Peter Turchin and Ibn Kaldun and has applied their ideas to Microsoft’s recent fall:

Yep: the uncouth nerds who created Microsoft became incredibly rich, acquired couth, and lost their edge; Apple stayed edgy in part because of Steve Jobs, but also because it was a disappointment for so long. And if its plans to build a high-tech Versailles are any indication, the now super-successful Apple may be heading down the same road as its one-time nemesis.

Both states and corporations are, at some fundamental level, cooperative enterprises, Turchin explains:

In the beginning we start with small groups of entrepreneurs randomly thrown together by chance. The vast majority of these incipient firms fail. Most of these groups will contain uncooperative selfish knaves. All such groups will fail with 100% probability; only groups consisting entirely of cooperators have a chance. However, the majority of such potentially cooperative groups will still fail because they will be unable to hit upon the right combination of social norms and institutions to enable them to cooperate effectively. As an example, people coming from different ethnic backgrounds often find it difficult to concert a cooperative action, simply because different cultures evolved different ways of cooperating, and these may not work well when thrown together.

In the next step, the majority of even those groups that consist of cooperators and have acquired effective cooperative institutions will fail — because they don’t have the right product, or perhaps because they are simply unlucky. But at least they have a chance, whereas groups with knaves and lacking the right institutions have no chance at all.

This is a typical cultural evolution scenario. At this stage we have a lot of variation, with all kinds of incipient firms churned out, and a selection mechanism that weeds the ones that don’t cut the mustard. This is completely analogous to the Ibn Khaldun situation of the stateless ‘desert’ where groups that can’t cooperate together in defense (and predation on other groups!) are rapidly eliminated.

Only those Bedouin groups that wield a lot of asabiya survive and thrive in the competitive desert. Analogously, only those start-ups that have a lot of — well, asabiya — survive and thrive in the competitive markets.

So that’s how high asabiya firms are generated. What happens next? Next they need to expand without losing asabiya. That means that they need to be very picky about accepting new members (keep those knaves out) and have another set of institutions that would allow them to assimilate newbies to the firm’s social norms of cooperation. If they surmount this challenge, they will expand and become a huge corporation.

But eventually the rot sets in. More and more knaves weasel their way in. The institutions that sustained cooperation begin to be undermined by the selfish behavior of freeriders. Moralistic cooperators, in response, withdraw their cooperation, because they don’t want to be taken advantage of. Prosocial founders and early joiners leave the company and join more cooperative ones, or start new businesses.

Eventually knaves reign and the company is really moribund. However, it’s big and has a lot of inertia and so it survives — for a while. Then, however, a particularly greedy set of executives, or a market downturn, exposes its inherent weakness and the corporation goes under. You can substitute ‘executives’ with the ‘elites’ and ‘corporation’ with ‘empire’ and you have the gist of my theory of why empires collapse (however, the time scale on which firms rise and fall is much faster than that for empires).

And that’s how I see the fall and decline of imperial corporations, when looked though the lens of Ibn Khaldun’s theory. I won’t name names, but I am sure we all can think of a number of examples of such moribund corporations.

This matches Carol Quigly’s notion of institutional imperative, which T. Greer summarizes:

According to this imperative, organizations are formed as a means to accomplishing a stated goal. These organizations are thus instruments whose role is limited to the function they were designed to perform. Over time these instruments tend to denigrate into institutions — organizations who exist for their own sake, devoting resources to protecting their position instead of directing resources towards the fulfillment of their designed role.”

He continues:

What I find most interesting about tying the institutional imperative directly to asabiyah is cycles – or rather, the cycles within cycles. In the case of American business, you have the larger asabiyah cycle of American society as a whole (visible among our top executives today – they are far less ‘pro-social’ than their counterparts in the 60s), but then smaller cycles of specific organizations within American society itself (in this case individual firms).

The neat thing about free markets is that is allows “moribund corporations” to break apart without the dreadful consequences we usually associate with the collapse of nations and states. Indeed, because these corporations are usually replaced by their more instrumental peers, the business asabiyah cycle is a great boon to larger society.
I imagine similar cycles are present in all human organizations, including most bureaucracies. The lean, can-do OSS of the Second World War slowly morphs into the moribund CIA of today, and so forth. Only difference is that there are no Bendouin rival bureaucracies to push them out.

Gene Anderson adds a few more points:

One might add that asabiya doesn’t just happen; in Ibn Khaldun’s theory, it requires a leader with charisma, concerted ability to manage force, and generosity, who emerges in a competitive situation where the best leader unites the biggest force and therefore wins. Then when an established, mature government appears, charisma, generosity and whatever aren’t so much use — establishment sets in, dull gray figures take over, and things unwind. Ibn Khaldun figured about 100 years per cycle.

The best possible combination for collective action might be a Machiavellian leader and completely prosocial followers, Turchin notes.


  1. David Foster says:

    Ibn Kaldun’s ideas seem to have been a major influence on Antoine de St-Exupery’s novel of ideas Citadelle (published in English under the most unfortunate title Wisdom of the Sands). The book was never quite finished, since St-Exupery was killed flying a P-38 mission, but it is very thought-provoking and well worth reading, although the style, at least in the English translation, is a little off-putting, sort of faux-biblical.

  2. Ross says:

    FYI Isegoria, Turchin’s new book (draft; requesting comments) is here.

    David Foster, thanks for pointer to Citadelle.

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