THINKING CAP WEDNESDAYCapitalism's operating system has gone off the rails: An interview with Douglas Rushkoff

from Dangerous Minds:

In his latest book, Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity (Portfolio/Penguin), media/technology theorist and PBS documentarian, Douglas Rushkoff asks “Why doesn’t the explosive growth of companies like Facebook and Uber deliver more prosperity for everyone? What is the systemic problem that sets the rich against the poor and the technologists against everybody else?”



Rapid technological improvements have created unforeseen societal chaos and this change is just starting to pick up speed. Our economic operating system—the “program” at the heart of Capitalism itself—is deliriously out of control. The economy no longer serves the human race, just a tiny elite sliver of it. The rest of us, whether we realize it or not, to a certain extent toil on their behalf. Think about it: How did the Waltons become the richest family in America, amassing a collective fortune of around $150 billion, if not by siphoning off a micropayment from every single gallon of milk, bottle of shampoo or box of Hostess Ding Dongs sold there? Bud and Sam Walton might have started Walmart, but all their offspring did was win the lottery at birth.

If you think that sounds predatory—and it should—just wait until you get a load of what the big technology firms have in mind for us…

I asked my friend of some twenty years some questions over email.

Richard Metzger: You write how the operating system of capitalism is obsolete, creating vast spoils for a select group of lucky human beings who are more or less basically leeching off the rest of mankind’s activities, and in a world of increasing automation to make things even worse. What’s the new book’s diagnosis of the modern economy?

Douglas Rushkoff: That sounds like a pretty good diagnosis to me. Or I suppose those are the symptoms? The underlying problem is not a disease, however. It’s not that corporate capitalism has been corrupted by greed or even by the startup economy of digital businesses. The system is working precisely as it was designed to.

It’s just that the transfer of value from people and places into capital used to happen a bit slower. And our companies tended to do it to other places more than to us. So in the 1400’s, British East India Trading Company might have enslaved thousands of Africans or taken land from the people of the West Indies - where today it’s Walmart bankrupting our towns and Uber extracting labor from drivers.

So now, the extractive power of expansionary, growth-based capitalism has been turned against us. The same sorts of companies are growing, but at the expense of all humans - not just those we can’t see. And the startup economy does all this a whole lot faster. A company goes from zero to a billion in 24 months. And it only does that by abandoning its original goals of helping people do something new, and instead adopting scorched earth policies toward its own markets.

That’s the real problem: companies that want to be around for a long time need to keep their markets - their customers and suppliers and workers - healthy and viable. Once companies are in control of venture capitalists, that’s no longer the goal. They haven’t bought the company to own it, but to sell it. They only need their markets to survive long enough to get to the exit - the IPO or acquisition that lets them cash out.

In the process, the company can use its war chest of investment capital to regulate the marketplace in its favor, or undercut the prices of the competition. It’s not about doing business; it’s about selling the company.



Okay, if that’s the diagnosis, then what’s the remedy? Is there one?

There’s not a single remedy. That’s the one-size-fits-all ethos of the industrial age: figure out the solution, then scale it universally! (And make a ton of money in the process.) Rather, the solution set will be as varied as the people and communities of our planet. The first step is to remember that human beings retain their home field advantage as long as they stay in the real world, on planet earth. We are the natives here - the corporations and technologies and business plans are all invented alien. That’s part what the SF protesters mean when they lay in front of the Google buses.

The way to reduce the power of the companies extracting value from our economy is to begin transacting locally and laterally. Do as much locally as you can. See your town or city as the economy. If there’s people with needs, and people with skills, you have the basis for an economy. You just may need to develop an alternative means of exchange, such as a local currency or favor bank.

Of course that doesn’t replace the entire economy. People look at a suggestion like that, and they immediately thing I’m arguing that cash, banking, corporations, iPhones, and automobiles go away. We can’t help but think of things in apocalyptic terms. But all I’m suggesting is that we balance out even just a little of our Walmart or Amazon purchases with some more local, small-scaled value creation and exchange.

The other remedy is for those developing new technologies or applications not to accept so much venture capital. They still think that getting a lot of money for their idea is the best way to build it. But it’s not. The more money you take, the less control you have over the future of your company. When you take in VC, you have already sold your company to someone who doesn’t care about your app, your customers, your employees, or your mission. Kiss it good-bye. They only care about selling your business to someone else - to the next round of investors - and that means plumping it up. You will be forced to pivot from whatever you wanted to do, to something they think can let them sell the company. It doesn’t even have to make money - it just has to destroy a market and claim a monopoly over what’s left. 

I can’t help myself: What’s the prognosis?

I’m hoping that we can buffer the effects of the digital economy by engaging in some alternatives. Every exchange you make with another person amounts to an attack on the system. Corporations hate when we buy and sell from each other. That keeps money in circulation, and makes us less dependent on them for everything. If you buy from a small business, or sell to people instead of just working as an employee for a corporation, then you are threatening the corporate monopoly. They hate that; it confounds them - particularly if you do it even though the price may be higher. The full cost is ultimately a lot lower.

So I think we either soften the effects of all this extraction and begin to engage directly with other humans, or we watch more and more value - land and labor - get destroyed and converted into share prices. The market keeps going up as people and the planet are decimated.

It’s quite probable that our economic models are now more powerful than the human will to perpetuate our civilization. That’s why guys like Ray Kurzweil are now running Google: the world’s biggest corporations are run by people who envision a world without human beings. Where the corporate computers are our evolutionary successors.

That’s a quite probable prognosis, and I don’t like it. I don’t think computers experience love or even consciousness. I know it’s terribly judgmental, but I favor human life and consciousness to AI and machine life. As a human, I can’t help but feel something is special about us. So I’m still going to fight for a role for human beings in the future. I am on Team Human, and believe we should dare to tinker with capitalism in order to preserve a place for us and the rest of biology on our planet.

 



 

You’re CUNY’s Professor of Media Theory and Digital Economics. Digital economics? Can you define what that means, both in the loftier academic sense, and what it means in a more “real world” way? How do digital economies impact our lives?

To me, digital economics is looking at the political economy of digital media. That’s not just a smart phone in your hand:  it’s a business plan; it’s the expression of the corporate landscape; it’s an approach to energy and resources; it’s a reflection of our relationship to labor, and how much we are capable of camouflaging that labor. It’s a test of how far we are willing to outsource slavery in order to obtain inexpensive electronics.

The digital economy effects all of our lives, whether it’s Amazon destroying a marketplace, Airbnb destroying a neighborhood, Uber destroying an industry, or Facebook monetizing your social graph. When a robot replaces you at work, it’s real easy to blame technology. But it’s not the technology that’s costing you your income, it’s an industrial economy that has been built on the premise of extracting value from people and places, and converting it into pure capital.

The “value” of a commodity or service used to be backed by gold. Now it’s backed by… well, I’m not confident that I know exactly what it is that stores value anymore. Perhaps it’s by a collective gentlemen’s agreement of the world’s rulers, or by virtue of a collective hallucination that we all desperately want to buy into to keep society from collapse. Is economic reality just a matter of what they can get away with, put in the simplest way I can pose that as a question?

Well, the whole idea of money having value in itself is the bizarre part. That’s the part that kills economies. The purpose of money used to be to promote the exchange of value. It was a convenient, temporary IOU that people used to trade for things in the marketplace. You didn’t want to have IOUs at the end of the market day. You just wanted the stuff. More like poker chips than the money they represented.

Yeah, there were precious metals and other sorts of things used as money, but they didn’t work very well. People hoarded gold coins, and there were never enough in circulation for people to get and sell all they wanted to.

The real money was market money - these temporary IOUs. And that money was so great at helping people exchange value that the people got rich. That’s why the aristocracy outlawed it. They forced people to use central currency - to borrow it, at interest. This way, the people with money got to get wealthier simply by being allowed to lend it out. What enforced the value of that money? Really, nothing but the law.

What makes money valuable is the declaration that it is our coin of the realm. Problem is, it’s much much better at storing value than helping people exchange it. We programmed our money to be more like fat than muscle. Corporations are great at accumulating it, but really bad at deploying it. The more money they take in, the more like banks they become. Their main activity is financial, not real.



I’m an online/digital publisher, but having been a physical book publisher earlier in my career, and also working at a daily newspaper, I know intimately how the print paradigm fell apart. Where does “digital economics” create value in a digital, knowledge-based space (like any online media property) if not via advertising—few people seem willing to pay for content on the Internet—and do you feel that the ad blocker is an existential threat to the likes of Yahoo and Google, if not the entire infotainment ecosystem?

The real threat to the ad-based Internet is the fact that advertising and marketing have never accounted for more than around 4% of the total GDP (a measure of the whole economy). And that’s being generous. But here we are, staking the future of many many industries on their ability to market and advertise. Everything from Google and Facebook to big data is ultimately an advertising play. But if we’re all supposed to write and sing and perform and create for the ad revenue, then who is left to advertise? There’s not enough toothpaste and razor blades to pay for all this.

The last laugh is that this thing that digital platforms did to books and music and movies and jobs? It’s going to do that to finance itself. The capital markets are driving themselves into a mega bubble - a bubble of bubbles. This is the stock market on steroids, and they’re shooting more into their veins every day. And we all know how that ends.

But yeah, ad blockers are at the frontline of the war between two models of digital media - the fee-for-service model of HBO or Apple, and the ad-backed but otherwise free model of Google or broadcast TV.

I find Google’s lack of a response or any kind of announced strategy to deal with Apple’s ad blockers to be very troubling. I’ve heard rumors of a lot of meetings and talk, but not of actual solutions that will be rolled out in this quarter or next. The digital giants are going at each other’s throats. Isn’t this the sort of frenzied cannibalistic capitalism you warn about in the book?

Yeah. In the digital economy as they’re playing it, there’s a true winner-takes-all ethos. They’re not playing for a part of the market. They’re playing for the whole damn thing. Companies don’t just eat one another in the pursuit of growth; they actually cannibalize themselves. Yahoo is selling off it’s “core businesses.” What does that really mean? I mean, think about that one!

So Karl Marx is proven correct, yet again?



Maybe even Lenin more than Marx. He was a bit more incremental in his approach, and spoke more specifically about workers owning the means of production (rather than working for companies that owned all the equipment and could leverage that to exploit people). And he also coined the notion of a “society of abundance,” which is the problem we’re dealing with: markets based on scarcity just won’t work in a world where things are in abundance.

But yeah Marx was right. But we can’t say that in America, because people think it’s “communist.” They’re wrong, of course. We’re not talking about redistributing the spoils of capitalism after the fact; we’re talking about pre-distributing the means of production from the get-go.

Below, a November 2015 talk at the New School in New York City:

 

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