How Tech Rules

One of the hallmarks of the modern corporation is the separation of ownership from control. The firm is owned by shareholders but led by managers, who answer to shareholders only indirectly. Actually, it’s weirder than that. The corporation owns itself. Shareholders merely own stock, which is a claim on the firm’s assets and earnings.Elements of this arrangement have been around for centuries. Scholars have detected traces of early “joint-stock” companies in tenth-century China. In 1602 the Dutch East India Company conducted the first initial public offering in history, floating its shares on the newly created Amsterdam stock exchange. But the publicly traded corporation achieved a new prominence in the late nineteenth and early twentieth centuries, during the period of upheaval and dynamism known as the second industrial revolution.Observing the situation in Germany—the only other country that was industrializing as rapidly as the United States at the time—a young Viennese economist named Rudolf Hilferding saw a new stage of capitalism emerging. He called it “finance capital” in an influential book of that title published in 1910. At the heart of Hilferding’s analysis was a simple...