Capitalism has its root in the power of Capital - money! Capital is the engine behind the Industrial Revolution because, to be able to mass produce goods, companies have to buy expensive machinery whose cost has to be recovered over many years. Capital is a necessary consequence of acquisition and ownership of expensive stuff.

The growth of the power of Wall Street is directly related to the needs for raising capital. Financial Institutions raise money in the capital markets, and command tremendous influence amongst the seekers of funds for their companies.

The power of capital has been the story of the West since the Industrial Revolution to date. Questioning the power of capital, Wall Street and the influence of infusions of money in the fortune of companies has always been considered heretical. But this is the right time to consider whether a new model must emerge from the ashes of capitalism that reflects the real needs of today.

Consider

Interest rates are lower than they have ever been and remained low for several years in a row. From a sheer demand and supply situation, the indication of low premium for borrowing money is that the demand for capital has been low and very few companies need to go to the capital markets for raising funds.  They have either tailored their growth rate (or been forced by markets to do so) to consume capital at a rate that is sustainable in line with their revenues, or are able to meet all of their cash needs from the money they generate from their businesses.

Service Sector

It is possible to start a business using services provided by external sources without incurring the capital costs of owning the assets needed to provide that service and incurring the running costs of that infrastructure.  For example, providing payroll requires information systems, personnel, computing facilities, human resource specialists, tax law specialists and people knowledgeable about government regulations - OR - the company can purchase payroll services from a service provider such as ADP for less than 75 dollars per employee per month. Today, it is possible for businesses to be service based instead of being capital based and convert requirements for capital to more modest demands for monthly cash.

Manufacturing Sector

Businesses are getting their fabrication and manufacturing done offshore using providers who also service other companies as well. With the economies of scale, providers are able to provide multiple customers with manufactured goods. The cost of entry to but manufacturing services is much less than the cost of capital needed to build captive manufacturing infrastructures. Once again, a need for capital has been converted into a more modest need for cash to pay for batches of manufacturing, one batch at a time.

These are fundamental tectonic shifts in the need for capital and the power of capitalism.

Enterprise Architecture can help!

Enterprise Architecture is a discipline that allows businesses to represent services in a manner where these costs can be represented and aggregated. Enterprise architecture for the new model of a company allows the owners and operators of the company to constantly operate the enterprise using working capital instead of large capital investments.