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Multinational Small Business

Nick Szabo

Currently the vast majority of businesses on the planet are small, but the vast bulk of multinational business is conducted by large corporations.

In the future the size distribution of multinationals will approach that of local business. The phase change between these states may be quite rapid as telecomm and transport costs pass through a "melting point", creating a wide variety of new multinational small businesses, and industries to support those businesses.

Barriers to multinational small business include

Both transport and telecomm costs have become unprecedentedly low, and with fiber optics telecomm costs will drop orders of magnitude further.

Small business can cut through the Gordian knot of jurisdictions with the technologies of jurisdictional independence, including strong encryption for communications and databases, digital cash, firewalls, foiling of traffic analysis with proxy servers and digital mixes, and other system security measures. For use of these capabilities to become routine they must be made seamlessly available in the telecommunications equipment and software used by small business. In their commercial dealings, businesses will increasingly deal with industry specific dispute arbitrators rather than traditional legal jurisdictions, and auditing information from transactions will be shared only between the parties necessary to resolve the dispute. Businesses will learn to share the information needed to attract investment and sales, only to those investors and customers, without jeopardizing their legal status in any major market in the maze of obscure jurisdictions they operate in. The companies that first bring these capabilities to international small business at affordable prices stand to reap large fortunes. The new paradigm of smart contracts may provide the cornerstone for building these tools.

Once jurisdictional indepdence is won, small business has nearly endless opportunities to arbitrage between the relative strengths and weaknesses of various localities in various aspects of their business, much like multinationals currently take advantage of relaxed regulatory burdens and low labor costs in Third World countries now. Government intervention probably costs the global economy over $3 trillion U.S. dollars annually; thus vast markets wait to be cracked open by short-circuiting the intervention of governments in both macro and micro markets.

Language and culture may remain the largest barriers. Two methods of attack:

  • The rise of virtual nations. Multinational small businesses might speak entirely English, Japanese, Mandarin, etc. Their employees might live primarily within a single cultural milieu, dispersed thru a large number of small ethnic communities around the world, keeping close culture-specific, multimedia communications links between the communities. The worldwide Anglo, Japanese, and Mandarin business networks will be taken up by other cultures, and physically dispersed in most cases.

  • Language-translation software. Crude, specialized versions might soon be reliable, convenient, and inexpensive enough for many kinds of small business uses, such as translating technical manuals.

  • English is becoming increasingly the de facto language for business and technology.

One interesting question is what small changes might bring about the phase change faster. Something as simple as a user-friendly voice teleconferencing system, might be enough to tip the penguins into the water. Or it might be widespread Internet access with encrypted, route-mixed TCP/IP connections and virtual whiteboards.

Another interesting question in any major new trend is what will be the bottleneck pieces. With the clonable PC, Intel's CPUs and Microsoft's DOS turned out to be the only proprietary elements, with assembly, disk drives, terminals, and the like highly competitive. Wealth will flow to the businesses that provide the bottleneck tools for the coming explosion in multinational small business.

The flip side of multinational small business is setting up market processes internal to the large multinational corporation.

Please send your comments to nszabo (at) law (dot) gwu (dot) edu

Copyright © 1997, 1999 by Nick Szabo
Permission to redistribute without alteration hereby granted

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