The Network that (likes to think it) runs the World

Scientists at the ETH Zurich analysed the international ownership network of multi-national companies. If you had a look at the intrinsic properties of real-world and biological networks, the 80-20 rule comes as no surprise: in biological networks, usually over 80% of the edges are covered by less than 20% of the nodes. A related phenomenon is called the Pareto Principle in economics. The core of this network contained 1318 companies, which

… represented 20 per cent of global operating revenues, the 1318 appeared to collectively own through their shares the majority of the world’s large blue chip and manufacturing firms – the “real” economy – representing a further 60 per cent of global revenues …

“Reality is so complex, we must move away from dogma, whether it’s conspiracy theories or free-market,” says James Glattfelder.

It took me some time to find the original paper on PLoS, which isn’t linked from this article on the NewScientist – probably because it wasn’t out yet at the time:

Reference: The Network of Global Corporate Control by Stefania Vitali, James B. Glattfelder, Stefano Battiston (2011) PLoS ONE 6(10): e25995. doi:10.1371/journal.pone.0025995

How these findings relate to the error and attack tolerance of scale-free networks in the context of the current economic situation is further food for thought. But I urge caution to naïvely transfer insights from one domain to another, there are no simple (mono-causal) answers to complex problems. Especially when dealing with the emergent properties of networks, there is only one constant: they tend to work out quite differently from what we initially thought.


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