An Economic Theory of Woke Takeovers

Did Gary Becker explain why organizations cave to the mob?

Many of us are mystified that organizations have caved in to Woke mobs so quickly and completely. To become Woke seems to detract from the mission of the organization as well as contrary to the interest of key stakeholders. Consider:

• Woke universities stray from their mission to pursue truth while alienating many students, alumni and state legislators

• Woke newspapers stray from their mission to report objectively while alienating older journalists and many potential readers

• Woke school boards stray from their mission to offer the best education while alienating many parents

• Woke Democratic leaders stray from their mission to achieve electoral success while alienating working-class voters, including Blacks and Hispanics.

• Woke corporations stray from their mission to earn profits while alienating many of their customers.

It seems fair to say that there is a silent constituency, even a majority, within these organizations that does not support the mob and its methods. Why are they allowing the Woke to take over?

I am going to suggest that perhaps economist Gary Becker, who was awarded the Nobel Prize in 1992 and died in 2014, had the answer. As the relative importance of firm-specific human capital declines, workers are less invested in their organizations. This weakens the organization’s commitment to its mission and values.

Becker distinguished between two forms of human capital. Specific human capital can only be used within a particular firm. General human capital can be used anywhere. As one of my professors once joked, “Specific human capital is knowing where to find the bathroom. General human capital is being able to read the sign on the door.”

Specific human capital means “knowing how we do things here,” with the emphasis on here. It is organizational culture, including rules, procedures, terminology, management systems, and behavioral norms.

General human capital means skills that you could use in many different settings. Fundraising experience, fluency in a foreign language, coding in Python, working with spreadsheets, or marketing using social media are all skills that you could put on a resume to apply to many organizations.

Specific human capital binds the individual to the organization. Once you have accumulated knowledge that is useful in one firm, the firm is invested in you and you are invested in the firm. Both the firm and the individual have an incentive to invest more in the individual’s human capital and to deepen their relationship.

General human capital loosens the ties between the individual and the organization. If a job requires mostly general human capital, it is easy for you to find another firm that will pay you for your skills. By the same token, it is easy for the firm to replace you with someone else who has the same skill set.

Software eats specific human capital

The most important trend in society in recent decades is for increased use of computer technology. In Marc Andreessen’s words, “Software eats everything.” Moreover, the trend favors generic software rather than firm-specific systems.

Suppose that you manage patient records for a medical practice. If the office uses a paper filing system or a computer system developed just for that office, your knowledge of how to manage patient records is specific to that medical practice. You accumulate specific human capital. Instead, if the office uses one of the popular standard systems, such as Epic, your knowledge of that system can be useful in many different practices. You accumulate general human capital.

In the early 1990s, I worked at a firm that operated its own computer network and messaging protocols for communicating with customers. Today, no business would do that. Every company uses the Internet along with generic software, such as email.

This trend in turn tends to increase the importance of generic human capital relative to specific human capital. You don’t need to be trained on your firm’s computer system; you can navigate based on your experience with interfaces that are familiar on the Internet.

The result of this is that people are not as attached to organizations as they used to be.

• As a college student, you do not depend so much on what is in your university’s library, or even what is in the course catalog. You have the Internet. Speakers gets canceled? You can find them on YouTube.

• As a journalist, if you do not like what is happening at your newspaper, go write for Substack.

• As a politician, if your party does not back you, go directly to the people on Twitter.

• If you work for a company that engages in political gestures that you think are silly, why care? You work remotely and you have your own side project that you’re passionate about.

The point is that people are not tied to organizations as closely as they were a couple of decades ago. They are not motivated to put up resistance when a determined minority of Wokesters tries to take over.