“The moment we stop optimizing the digital economy for the growth of capital, and optimize it for the circulation of value between people, everything will start to get better really fast.”
Another eye-opening interview with our friend Douglas Rushkoff. This one was conducted by Jesse Hicks and originally published at The Kernell.
For more than two decades, Douglas Rushkoff has provided incisive commentary on our increasingly connected, digitized, and corporatized world. From Cyberia: Life in the Trenches of Cyberspace to Life Inc.: How the World Became a Corporation and How to Take It Back to his newest, Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity, he’s chronicled both the promise and the peril of of a global society being remade by the Internet and high-tech corporations.
In his new work he argues that, appearances to the contrary, today’s online colossi—think Facebook, Google, Apple, and the like—haven’t truly revolutionized our economy. Instead, they’ve reproduced the Industrial Age corporation at a global scale, with all the benefits of digital innovation. At heart, though, they’re still designed to extract value and to pursue growth above all else. That mission, he argues, is becoming increasingly untenable, and for perhaps the first time there’s an alternative: companies that leverage technology to spread abundance rather than hoard wealth to themselves. But making that happen first requires rethinking some of our most basic assumptions about what corporations do—and why they exist.
Via email just prior to his book launch at SXSW, we discussed why our global economy is stuck in an Industrial Age mindset, why Wall Street considers Twitter a failure, and why Silicon Valley needs to start building companies that aren’t just meant to be sold for a healthy return on investment.
What made you write a book about the failings of the digital economy?
I got the idea the day that Twitter went public, when I saw my friend, one of the co-founders, on the cover of the Wall Street Journal with the number of billions he made that day. I wasn’t sure whether to be happy or sorry for him. Yes, he was rich, and he had disrupted the communications industry—but he was surrendering all that disruption to the biggest, baddest industry on the block: finance.
Worse, Twitter would have to somehow deliver impossible returns to its new investors. They were demanding growth. So even today, Twitter—which earns half a billion dollars a quarter—is considered an abject failure by Wall Street.
Worst of all, this obligation to grow has turned otherwise promising companies into extractive monopolies. In order to grow, they use scorched-earth practices that take value from people and places and turn it into capital for their shareholders. This growth mandate is cause for the increasing disparity of wealth, and it has been energized and accelerated by digital technology. Digital technology was supposed to distribute this wealth to more people, not impoverish the many for the wealth of a few.
The main target of your critique is what you call “the growth trap.” Since at least the birth of the corporation, you argue, our economic thinking has been dominated by an unrelenting drive for growth: Companies have to continue to extract more and more value in order to be seen as successful. You suggest that we’ve reached a point where this is no longer tenable—and that digital technology in particular can enable a new way of thinking. Can you explain the growth trap and how it undergirds our current thinking?
Well, it takes a whole book to explain this properly, because the requirement for companies to grow really traces all the way back to the institution of interest-bearing currency, which requires that the economy grow in order for that interest to be paid back.
Today, the equivalent of those bankers are shareholders. They expect not just interest, but tremendous returns on their initial investments. They witnessed the success of Facebook and Google and want those sorts of returns, too. So they put money into a company like Twitter, and then expect to earn back 100 or 1,000 times on their original investment. The fact that Twitter makes 500 million dollars a quarter is considered an abject failure by the investors. And so Twitter must look for some way to “pivot”—that is, change from a super successful company that lets people send 140-character messages, into something else.
Regular companies are in the same position. Pepsi, McDonald’s, Exxon all have shareholders who demand that the share price go up—that the company grow. And the bigger these companies get, the harder it is for them to grow. They are already worth billions of dollars. In fact, corporate profits over total value have been declining for over 75 years.
The CEOs of these companies read my articles about getting out of the growth trap, and they call me begging for the way out. They all know they can’t keep growing at the rate demanded by their shareholders. They can fake it a while, but in the end, these scorched-earth policies just kill the markets and consumers on which they’re depending. Well, in the real end, they end up extracting all the value out of people and places until there’s nothing left.
Growth depends on expansion. Not just that, but on accelerating expansion. You have to grow faster and faster. And it’s just not possible for companies of this size to do that. They must instead learn to pay shareholders with dividends. Run themselves like family businesses, for the long term.
You noted that at the beginning of the Net, there were serious and deeply felt expectations that it might not become, as you’ve characterized it, a strip mall. Today we have “social media” that basically recruits people to become marketers to their friends, and a “sharing economy” driven by the idea that if you’re not monetizing every bit of your time, you’re wasting it. Does it feel different this time—that this time there might be a role for the Net to play in genuinely reimagining our economic world?
Well, the thing that feels different to me is that pretty much everyone sees that it’s not sustainable. How can everyone get paid to advertise? What’s left to advertise? Marketing has never ever accounted for more than 3 or 4 percent of GDP. And now it’s supposed to be our main industry? That, and finance? They’re both abstractions. When we see a company as successful as Twitter failing, we come to understand that the model itself is broken.
As for “sharing,” Uber drivers taught us that this is a crock. The unemployed gig drivers of Uber are now as smart about labor politics as the cabbies from London. Uber’s monopoly and policies have been rendered so transparent.
And yes, while I’m not a techno-solutionist, I do believe that networking technologies could enable much more distributed prosperity. The digital economy, so far, is just corporate industrialism on steroids: extract value from people and places. Digital companies are like software programmed to take currency out of circulation, and deliver it up to shareholders. They could just as easily—more easily, in fact—be optimized to promote the circulation of currency. Most simply stated, less like Amazon, more like eBay. It’s as simple as letting Uber drivers have shares in the company, proportionate to the amount of work they’ve done. And that would be pretty easy to calculate and authenticate with something like a blockchain. Networking technologies are biased toward more distributed solutions. That’s what they were originally built for.
But the real problem here is that our technology development is driven solely by the needs of capital.
The book’s title comes from an incident in which protesters in Oakland, frustrated by the way Silicon Valley companies are remaking the social fabric of San Francisco, threw rocks at the private buses that ferry Google employees to work. What did that event clarify for you, and why do you think those rocks were aimed in the wrong direction?
I don’t know that rocks needed to be thrown in any direction. Not just yet. The original protests did not involve rocks, and were entirely well-founded. Still are. Google and other Silicon Valley companies are behaving like foreign corporations. Workers move into SF, impacting rents, driving local businesses out of the neighborhood. Then they use public bus stops to take private buses to workplaces outside the city.
“The whole ‘startup’ process is really just the old wine of venture capital in a new digital bottle. These companies are built to be sold.”
And this crisis of poor wealth distribution is both real and symbolic of a bigger disappointment we all have with the poorly distributed gains of the digital economic boom. I try not to blame individuals for this—as if there are some mean people making this happen. They’re not mean so much as clueless. They have built very disruptive—positively disruptive— businesses, but haven’t disrupted the economic operating system on which they are operating. They are not truly digital companies so much as industrial companies running on digital steroids.
You point to the popularity of books such as The Second Machine Age as evidence that despite being in an entirely new economic environment, we’re still saddled with thinking from the Industrial Age. Why is that the case, and what’s the new kind of thinking that we ought to be embracing?
It’s only natural for our first response to be reactionary. Most books on how to thrive in a new economy are really about how to maintain a traditional industrial corporation. The whole “startup” process is really just the old wine of venture capital in a new digital bottle. These companies are built to be sold. And their revenue, when they even have it, is based on the company’s ability to extract value—not their ability to create it.
Where do we look for hope that we can shake off dead ideas and adapt to the new environment we’re in the process of creating?
We look for hope right there in the despair. Every person who can’t get a job at a big corporation is another person who gets to figure out how to create and exchange value in the real world. Every person who can’t get a loan is another person willing to consider how alternative currencies, favor banks, and the commons work. Every town whose economy has been trashed by a corporation is another community about to learn that the only things you need for a thriving economy are people with skills and people with needs.
The moment we stop optimizing the digital economy for the growth of capital, and optimize it for the circulation of value between people, everything will start to get better really fast.
Illustration via Max Fleishman
– See more at: http://kernelmag.dailydot.com/issue-sections/features-issue-sections/15982/douglas-rushkoff-throwing-rocks-at-the-google-bus-interview/?curator=MediaREDEF#sthash.fn9gVnLQ.dpuf