Douglas Rushkoff on Updating our Economic Operating System

I just watched an excellent talk from SXSW, titled Distributed: a New OS for the Digital Economy, on the “vacuum cleaner” effect corporations have on industries, communities, countries, and ultimately themselves, and what we might be able to do about it. Given by Doug Rushkoff, the talk riffed off themes from his new book Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity (I love that he advises his audience to steal a copy if that’s the only way we can read it), and his older book Life Inc. How Corporations Conquered the World and How We Can Take it Back.

Rushkoff is an eloquent and enthusiastic speaker, who can turn a complex, nuanced argument into a funny, inspiring performance reminiscent of Russell Brand at his impassioned best. His political-economic approach integrates aspects of classical liberalism (factors of production and the peer-to-peer market as a challenge to feudalism), marxism (alienation of workers from their products), anarchism (waged work as part-time slavery), digital libertarianism (the shared platform as a radical alternative to the corporation), cooperativismo (wages can be higher and prices lower when workers are also shareholders), monetary reform (the inflationary nature of using centralized, interest-bearing debt as currency) and more. Rushkoff combines all these ingredients into a thoughtful and coherent dish of problem statements and possible solutions, rather than just throwing them all into a blender, along with a grab bag of tin-foil-hat speculation, as the makers of films like Zeitgeist or Thrive do. In fact, I’d love to see someone make an arty, activist documentary illustrating Rushkoff’s ideas with the same budget as ‘Thrive’. Something like The Corporation, but with more focus on alternatives and solutions.

One of the core themes of the talk is the question of what drives small businesses to turn into corporations, or get bought by them? First, we need to be clear on our definition of “corporation” (also known as a “public company”), which is a state-incorporated, for-profit, limited liability structure, owned at least in part by whoever buys its shares on the sharemarket. Rushkoff points out that in the tech industry, “start-ups” (small businesses) need funding to develop before they can earn enough revenue to be sustainable, and the usual route for this is Venture Capitalists (VC). One the VCs put their capital in, they gradually “pivot” the business towards being acquired by a corporation, or IPO (selling shares and becoming one), so the VC can get their capital back fast, with capital gains, to put into another business.

Another option is to take out a business loan, but there is a legal limit to how much money a company can borrow. A business has to be solvent at all times (assets higher than debt), and while a loan goes on the books as a debt, an investment of equity goes on the books as an asset. Also, who hands out business loans? Banks. What are they? Usually, corporations. Since banks charge interest on loans, this also drives the business to grow, so they can afford to pay the interest as well as paying off the capital they were loaned.

Whatever idealistic social enterprise we might start-up, we are stuck in this trap unless we create sustainable alternative investment models like equity crowdfunding, micro-patronage, and ethical investment funds, who only buy non-transferable shares that can only be sold back to the business itself. These are the kinds of “small and slow solutions” (to quote Holmgren’s permaculture principles) Rushkoff discusses at the end of ‘Life Inc.’, and goes into in more detail in ‘Throwing Rocks…’. I listened to an audio book version of Life Inc. last year, read by Rushkoff himself. I highly recommend it (in either text or audio form) and I’m looking forward to reading the new one. If you only watch one online talk this year, his SXSW talk would be a pretty good choice, right up there with Yochai Benkler’s talk from last year’s CreativeCommons Summit, which was the base of my Crowdsoucing or Outsourcing blog post late last year.

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