FRIAR BARNARDINE. Thou hast committed–
BARABAS. Fornication: but that was in another country,
And besides, the wench is dead.
- from “The Jew of Malta,” Christopher Marlowe, 1589/1590

Wars and calamities breed predators. Morality is almost always a casualty of the disorder following upon conflict and social upheaval. So we should not be surprised, however disgusted, that a new breed of predator has crawled out of the current financial wreckage. Desperate people facing the loss of their homes through foreclosure are an easy target. Some of the same unscrupulous operators who peddled subprime mortgages to people who could not afford them are now selling fraudulent remedies that purport to help homeowners avoid foreclosure.

According to the U.S. Federal Trade Commission:

Fraudulent foreclosure “rescue” professionals [aim] to make a quick profit through fees or mortgage payments they collect from you, but do not pass on to the lender. Sometimes, they assume ownership of your property by deceiving you, the homeowner. Then, when it’s too late to save your home, they take the property or siphon off the equity.

The scammers extract money from distressed homeowners in several different ways: by obtaining a fee in advance for promise of service; finagling a transfer of the property title to the ‘rescue’ firm by allowing the owner to remain as renter; claiming special relationship with or pretending to be the lender and having mortgage payments sent to the scammer’s address; and (illegally) charging a fee for modifying a mortgage under the new federal relief plan.

Greed and unscrupulous behavior are certainly not new phenomena. But today there are many more opportunities and much greater scope for financial predators. The increase in opportunities is largely a consequence of the growth of intermediaries and agents in financial transactions, which in turn results from specialization of function in the financial sector. In an effort to make operations more efficient and flexible, the financial services industry has copied long standing practices in the goods producing sector. For example, mortgage lenders use a variety of brokers to bring in customers; they rely on external appraisers to assess property values; they use external credit reporting agencies and in-house specialists to determine the credit worthiness of borrowers; they outsource the record keeping for their loan portfolios; and they contract with securities specialists and underwriters to assist in creating bundles of mortgages to offer to the investing public.

Each of these specialized functions creates distance between lender and borrower and enlarges the role of intermediaries. With each new intermediary comes an opportunity for exploitation or fraud, as the financial transactions in which intermediaries play a role become increasingly obscure to individual consumers. Making matters worse is the increased scope for mischief stemming from the use of the new interactive media available on the Internet. It is much easier than ever before to reach and interact with masses of consumers. Web advertising and email have democratized information access, but at the same time have empowered crooks. The anonymity of the Web gives license to commit acts of fraud that might be more difficult in traditional social contexts where face-to-face interaction often inhibits unacceptable behavior.

Action at a distance facilitates a diminished sense of responsibility. Of course there are crooks who steal from family, friends and neighbors, but many more who steal from people at a distance whom they don’t know and are not likely to encounter. Virtual organization requires loose coupling between actors to achieve its promised flexibility and efficiency. Unfortunately this requirement has the disadvantage of distancing people from each other and thus incurring the cost of reduced trust and responsibility.

Complete Japanese Translation (ZIP file containing all chapters)

Individual chapter PDF files
– Forward by Translator
– Profile of Translator
– Preface to Japanese Translation (by Author)
– Foreword (by Murray Turoff)
– Preface
– Chapter 1: Intimations of a New Order
– Chapter 2: Virtual Organization
– Chapter 3: Information Commodities
– Chapter 4: Mobile Capital and Instant Payments
– Chapter 5: Standardized Business Relationships
– Chapter 6: Emerging Virtual Enterprises
– Chapter 7: Privatization of Government, Expatriation of Business
– Chapter 8: A New Political Economy
– Chapter 9: The Virtual Manor: Consumption, Work, and Identity
– Chapter 10: The Virtual Manor: Family and Community
– Conclusion
– Bibliography

Virtual organization presents two different faces to the world. One face reveals an ability to enhance the efficiency and effectiveness of management, and to achieve greater flexibility of action. The other shows the dissolution of traditional relationships in the course of realizing these desirable ends. In a word, virtual organization is a disturbing agent of social change and thus provokes ambivalent responses. It is most clearly evident as an innovation in business management, especially within multinational firms and in e-commerce. But virtual organization has implications for society as a whole and is thus treated in this book in its broad social context.

It is neither possible to understand nor to exploit this innovation effectively without delving into its social roots and implications. The virtual team, for example, can be an effective instrument for leveraging resources within a company in carrying out a project; but it relies on mediated communication, rather than face-to-face interaction, making it more difficult to develop mutual trust among team members. Establishing trust in this new kind of social environment poses challenges of a social and psychological nature that require managers to look beyond normal business practices.

The management principle that underlies virtual organization is dependent upon loose coupling between social units. To achieve improvements in efficiency, effectiveness and flexibility, it is essential to keep cooperating parties at arms length from each other. If, for example, a supplier is bound to a company by strong social ties, it is not possible to switch to a new supplier without serious disruption to the company. It is evident that virtual organization requires computer-communications infrastructure for its realization. Equally indispensable are information markets, standardized organizational interfaces, and risk-management tools needed to support loose coupling between social units.

These innovations challenge traditional patterns of social interaction. Information markets are extensions of labor markets. Just as the latter supplies labor as a commodity, the former serves up knowledge, skill and information in the form of computer-based products and services. One major stimulus to the growth of information markets is software re-use. Although still immature, software component markets are destined to become a major factor in software development. The aim of software re-use is to improve the software development process by lowering costs, increasing efficiency and enhancing reliability. These ends are to be achieved by reducing dependence on human programmers. Such reduced dependence is central to the purpose of information markets in general which aim to substitute computer-based for human-based knowledge in production.

Standardized social interfaces are needed to transform outsourcing into routine management practice. Changes in business relationships entail costs and often cause problems. Switching from contractor S to contractor T for some service, for example, involves at the very least altering database entries in accounting systems, and may also require legal work to produce new contracts. What is more, even small incompatibilities between T’s service and the one provided by S, or misunderstandings between the new contractor and the contracting organization may cause serious problems. These issues are clearly recognized in the literature on outsourcing.

Protocols that standardize interfaces between organizations and individuals will help to resolve these issues in a way that is familiar from the history of standardization in manufacturing. Instead of screw threads, social protocols apply to connections between social units, but the function is the same in both cases, namely, to make parts – whether physical or social – fit together with little or no adjustment.

In addition to information markets and standardized interfaces, virtual organization requires instruments for managing risk. The evolving management paradigm facilitates switching between contractors and partners on a global basis, and switching may intensify the exposure of businesses to political, currency and trading risks. Financial tools such as futures and options contracts have been used for several centuries. These tools have been extended and refined in recent decades to enable the use of sophisticated hedging strategies suited to the risks of conducting business in a fluid international arena. Moreover, global computer-communications infrastructure makes it feasible to offer round the clock electronic trading instead of being confined to the limited hours of the New York, London, Tokyo or other traditional stock exchanges. Being able to buy and sell anywhere at any time further reduces business risks in the often turbulent international environment.

As noted above, the socio-technical innovations needed to realize virtual organization pose a challenge to traditional patterns of social interaction. Implementation of the management paradigm underlying virtual organization favors a particular personality type, one capable of forming and dissolving social ties at will, guided by criteria of self-interest largely devoid of emotional content. Trust and loyalty need to be re-defined for such personality types. However this may be, it is clear that virtual organization weakens attachments of loyalty to persons and places. More generally, it signals the loss of community and attenuates the power conferred by group membership. If the advantages of virtual organization are to be secured without unduly weakening affective ties and group solidarity, some – as yet undetermined – adjustments in its application will be required.

Virtual organization is attractive because it extends personal freedom by allowing organizations and individuals to define and re-define themselves easily. At the same time it poses tough challenges because it tends to minimize affective ties in human relationships and thereby may diminish the cohesiveness of traditional groups and communities. However it unfolds as a socio-technical innovation in the future, virtual organization will be incorporated into the standard operating procedures of management simply because it confers competitive advantage.

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“Before Internet (BI), the historian Stavrianos (1976) wrote, “The Western world today is re-experiencing the decay and despair of its early post-Roman centuries.” Despite opposite causes – technological stagnation in the Roman Empire versus unbridled technological development in the modern West – both periods bear similar marks of decline…”

Reviews:
“…is a meditative and thought-provoking discourse on how modern information technology molds and transforms society itself… Virtual Organization is highly recommended reading which delves deeply into serious and complex forces driving the growth and change of our modern society.” – Library Bookwatch Review

“Does what few, if any, works on information technology and its impact on society do — it goes beyond mere descriptives to offer a carefully argued theory of how it is that this technology has so dramatically and permanently reshaped social institutions the world over. Like Karl Marx and Adam Smith before him, Mowshowitz turns to the forces of production as the key to understanding the essence of this technology. The neo-feudalistic picture of society that emerges is surprising and provocative. This book is a “must read” for anyone interested in technological innovation and the future of society.” – Dorothy McKissick President, Jacquard Corporation

“With historical analogy, and interdisciplinary acumen, Abbe Mowshowitz dissects the global virtual organization which, if not checked, is likely to usher in what he calls virtual feudalism. With concepts borrowed from mathematics, computer science, and international business, Mowshowitz shows that the new virtual organization has the hallmark of displacing the nation-state as the main wielder of authority and appropriator of social services and basic needs of the citizenry…. An intriguing book which puts it into a class by itself.” – Elia Zureik Professor of Sociology, Queen’s University

“Mowshowitz has an enviable knack for bringing social and historical factors to bear on our understanding of the consequences of technological change…. Some of his views of potential outcomes may be shocking and disturbing, but they cannot be ignored. In other writings he has pointed out the need for “radical criticism” as a necessary perspective on understanding technology and guiding society. In this book he has clearly taken his own advice. The result is a very refreshing and stimulating view of the future and the issues we must face.” – Murray Turoff, Distinguished Professor Information Systems Department, New Jersey Institute of Technology