Douglas Rushkoff's Blog, page 23

Seeking Alpha – Why Growth As We Know It Is More Illusion Than Reality

One of the over-arching problems that we see afflicting this “non-recovery” is that in spite of the fact that the financial industry (capital) was responsible for the near-destruction of American capitalism, it is now once again in complete control of the economy. The financial industry is NOT about creating value; it is all about extracting value.

The economy’s addiction to growth has been forced upon business by the financial industry. This has lead to short-term thinking by CEOs who amputate profitable subsidiaries in order to demonstrate growth (in capital), or spend money on share buy-backs that temporarily inflate share prices, or most damaging of all, lock-up hoards of cash instead of investing. None of these machinations create value or long-term prosperity; in fact, they extract the former, and stifle the latter.

Douglas Rushkoff in his latest book Throwing Rocks at the Google Bus,demonstrates the artificial need for businesses to grow when he writes about the effect on the fundamental nature of Twitter following its IPO (i.e. transfer of the company into the hands of the financial industry). He writes:

Having taken in this much new capital, however, Twitter now needs to produce. It must GROW. As of this writing, the $43 million Twitter PROFITED last quarter is considered an abject FAILURE by Wall Street. In 2015 Twitter investors complained that the company was too far from reaching its”100 x” GROWTH POTENTIAL and forced out the CEO…..It’s not that Twitter is not successful; its’s just not successful enough to justify all the money investors have pumped into it……To do that, Twitter must grow into a corporation bigger than the economy of many entire nations. Isn’t that a bit much to ask of an app that sends out messages of 140 characters or less?

At some point, any market that a business is dependent on will get saturated, and further expenditures made in an attempt to continue to grow will result in diminishing returns for that business. The financial industry, however, does not take “no-growth” for an answer, even if a business is profitable. The overall economy, when measured most broadly by the GDP, is considered a failure if it doesn’t show accelerating growth rates.

Malthus, in the nineteenth century, showed that growth has limits, and these limits depend on a complex array of required resources. Technology can certainly extend these limits and increase the carrying capacity of systems, but no technology can accomplish this in perpetuity.

This is especially true when corporations find efficiencies by reducing the involvement of human resources (people). This results in the extraction and transfer of value from the real economy itself and into that of the technology owners (shareholders). This deprives the foundational levels of the economic pyramid (refer to SA article, “Our Economic Ecosystem Needs to be Rescued) of the required purchasing power to keep the economy healthy (see chart below).

Read the rest at Seeking Alpha.

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Medium – How Growth Became the Enemy of Prosperity and How To Fix It

In his new book, Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity, noted media theorist and author Douglas Rushkofftakes on the failure of the digital economy to make things better for more people. At the core of Rushkoff’s critique is what he calls the “obsolete economic operating system that emphasizes growth” and the abandonment of core values that occur once companies go public and succumb to short-term thinking.

Rushkoff suggests a shift away from the growth pressures of publicly traded markets and platform monopolies — and toward collaborative models that build on the contributions and add to the wealth of their workers, communities, and consumers.

In 2013, protesters in San Francisco, angry over gentrification and rising expenses, threw rocks at Google workers in a private bus. What was it about the incident that inspired your title?

The protests epitomized our widespread frustration about the poor distribution of wealth in the digital economy. Not just the elevation of real estate prices in San Francisco, effectively evicting the very people and businesses that embody the spirit of the city, but also the sense of betrayal that a company founded by two kids in their dorm room, a company that promised to do no evil, and seemed based on the idea that little links between people mattered more than the top-down choices of a behemoth like the old Yahoo, was now a growth-driven, shareholder-dominated behemoth. Those buses: the way they carted their employees back and forth from the Valley. They seemed to be the spaceships of an alien invasion.

You argue that growth-based capital business models have spoiled the liberating potential of the Internet and the broader economy. What is it about digital technology that makes these old ways of operating the economy even more destructive?

Digital companies tend to grow a whole lot faster than industrial age companies. It’s a lot quicker to scale up on Amazon Web Services than it is to build factories, deliver goods to showrooms, or establish global supply chains. Digital companies and business models also tend to scale more totally and rapidly than their predecessors. So while automobiles replaced horses in the industrial age, that took decades to happen and involved many different automobile manufacturers. When Amazon replaces the book industry, or Uber replaces the taxi industry, it happens a lot more rapidly, and there’s often one dominant player.

The main way the digital version of capitalism is more destructive is that most of these business models are not developed for long-term prosperity. The businesses do not need to succeed. They simply need to dominate their markets completely enough to establish monopolies, and then leverage those monopolies to move into new verticals. Amazon chose the book industry because it was low-hanging fruit: a vulnerable industry with no growth potential, easily disrupted by a player with a big enough war chest to undercut everyone’s margins. Amazon doesn’t need to make money with books.

Because Amazon doesn’t need a thriving book industry and Uber doesn’t need a thriving cab industry, these companies can take more scorched-earth approaches toward their markets. They can destroy the underlying business landscape. It’s the same strategy Walmart used — undercutting local retailers, paying employees poverty wages. But where it takes Walmart a couple of decades to bankrupt a community (at which point the store closes and moves on), digital companies can disrupt and destroy a marketplace much more completely and rapidly.

It’s not digital technology’s fault. It’s the fault of the business model. Thriving companies, like Twitter, are considered failures because they produce revenue instead of growth. That’s the big problem: revenue is discouraged because it has limits. The $2 billion Twitter makes off 140-character messages is considered a failure, because it turns out that’s about all you can make per year off a tiny app that delivers 140-character messages. Everyone should be celebrating, but instead they’re going to force Twitter to destroy itself in the quest for growth.

In your book, you contrast sustainability with the dominant paradigm of growth at any cost. Where do innovation and increases in actual useful wealth fit into a sustainable no-growth or slow-growth model?

A more realistically financed company gets to grow whenever it’s appropriate. You get to grow at the rate of increasing demand rather than the rate demanded by your debt structure. Innovation can take many different forms. You get so much more innovation when you’re not looking for ways to prove that it led to instantaneous growth. If I need to show growth in the next six weeks, the only way to do that is to fire people. If I’m allowed to wait a few months or even a year or two before getting the payoff of an innovation, then I’m free to develop new technologies and processes. Or I can develop products that invite user interaction. Or even develop apps and services in a way that lets a viable marketplace grow around them.

Innovation can be focused more on making products and services better than simply making more immediate profit off them. So instead of jumping into video services or data harvesting or some other signal of growth to investors, you can focus on the core proposition.

Even in nature, systems often reach a particular size. Like a coral reef. This doesn’t stop individual creatures from evolving, or the whole reef from developing new mechanisms for maintaining itself more effectively.

The audience addressed in your book is businesspeople and programmers likely to run businesses. Why them?

Businesspeople only take in advice that is very clear about its intentions and effect. Bernie Sanders’s impact is limited because he attacks business and billionaires. That’s not the way to communicate with them and create change (though some billionaires do get it.) The better approach is to show how the current game plan isn’t simply contributive to wealth inequality and incompatible with the survival of the human species. It’s also bad business!

We need to offer businesses a better path to prosperity. They are all failing in one way or another. CEOs are trapped by ignorant shareholders; shareholders are trapped by ridiculous policies. The current tax code punishes those who make revenue, while rewarding those who take passive capital gains. That’s no way to encourage economic flow or more transactions.

I’m not attacking business. I’m defending and reviving the obsolete business practices of buying and selling goods and services — which I still think can be rescued. CEOs are desperate for someone who can explain to them how to communicate with their shareholders in a way that lets them value the long-term profitability of their companies over the short-term share price. And by writing this book to them, and justifying my arguments as better business decisions, it makes more sense.

This is not the story of a system that has been corrupted by bad actors. It’s a system behaving exactly as it was programmed to. We just have to remember that we can optimize it differently.

What do you have to say to a young person (perhaps with a family) about to get a huge infusion of investment capital that will put him or her on the grow-and-sell-out path? What are the advantages of refusing big investment capitalization?

Many young entrepreneurs are actually eschewing that huge infusion of investment capital. They’ve watched the HBO comedy Silicon Valley, and know how that one works. (Mike Judge‘s show is a public service.)

Success stories are plenty. They’re not the Mark Zuckerberg stories where the winner has to figure out a way to give back 90% of his money. They’re stories like Scott Heiferman, who runs a successful company called Meetup. Great revenue, a couple of hundred happy employees, millions of users, patient investment. Or Yancey Strickler and Perry Chen with Kickstarter. They took only the capital they needed, and at the lowest possible valuation.

The bigger issue is that most digital businesses won’t make money. Not until they learn to help their users create value. Mining people’s data just won’t be a good long-term strategy. Too many companies are mining data, and the market research industry just isn’t big enough to carry the entire digital economy.

What advice do you have for readers who want to have successful businesses that create authentic value in the digital age?

The easiest advice: Make your users rich. It’s really as simple as that. We’ve moved from an industrial age, extractive economy to a digital age,distributed economy. While industrial processes were biased toward extracting value from people and places, digital technology is more biased toward networking and decentralization. Networks distribute value better than they monopolize them.

So succeeding in a digital age, creating authentic value, means sharing the means of production. It’s not about sharing the money after the fact. It’s about having businesses process and platforms that create opportunities for users, vendors, suppliers, employees, to create value.

That will look different for different industries. For banks, it might be supplementing commercial lending with crowdfunding. The bank is not merely the provider of capital (and extractor of value in the form of interest) but the provider of the expertise the town requires to capitalize itself. For Walmart, its as simple as setting aside one shelf for locally produced goods. For Fortune 100 companies, it’s replacing share growth with dividends (which then allows them to earn revenue rather than just show growth). It’s thinking like Uber, except giving your drivers shares in the company. Or like YouTube, except giving the video makers half the ad revenue.

There’s a critique of how we deal with currency in the book that goes hand-in-glove with your criticism of our growth based “operating system.” How does currency currently operate? How you would change it?

Central currency is borrowed at interest; this means the borrower (or the company that has accepted investment) must grow. Interest also sets in motion the growth-based business cycle, where investors look at companies less for earnings than for opportunities to sell. They aren’t patient enough to collect the winnings as revenue. They want to sell the company itself.

The currency is extractive by its very nature. We pay to use it, which means the banks act as a drag on all economic activity. Money is the best business in town, which is why the banking and financial services have gotten disproportionately large.

I’m trying to help people, businesses, and government retrieve some of the market systems that were forcibly repressed by chartered monopolies back at the dawn of the industrial age: local currencies, market moneys, and regulations that favored peer-to-peer exchange as well as simple revenue. These sorts of moneys — many of which were issued at the opening of the market day and redeemed at sundown — were optimized to promote transactions. They were more like poker chips than a precious metal you would save. They just helped keep track of who was getting what, and helped merchants “settle up” at the end of the day. It was money built for trade.

As people got wealthy using this money, the aristocracy was threatened. So they outlawed local currencies, and forced people to use central, bank-issued currency. This gave the wealthy a way to make money simply by lending their wealth. But it slowed down the economy, and forced dependence on the same feudal lords of the Middle Ages — or, today, the banks who have a monopoly. We have no way to exchange goods and services with one another without borrowing central currency from banks.

Monopolies, from Walmart to Uber, borrow money a whole lot more cheaply than you or I. They enjoy a competitive advantage over smaller businesses because of their tremendous cash war chests. The retrieval and implementation of local currencies and the creation of worker-owned cooperatives gives smaller and local businesses a more level playing field. That’s why Winco — a worker-owned version of Walmart — is beating Walmart in pretty much every market where they are competing head to head. Winco operates less expensively because it doesn’t have shareholders to pay in addition to its workers.

Meanwhile, local currencies give impoverished towns in Euro-crisis-stricken Greece and Spain the ability to transact internally and get many of their needs addressed without going into more debt to national and international banking cartels. They shouldn’t need to borrow money from banks simply to transact amongst themselves.

Likewise, our current tax policy rewards capital gains (extraction) with a very low tax rate, while punishing dividends (along with revenue, earnings, and payroll) at a very high tax rate. If we want to promote transactions and circulation, we should reverse that. We can initiate business plans and economic policies that are optimized less for growth than for the velocity of transactions.

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DLD Conference 2016 – ‘Throwing Rocks’ Interview

A story that started 1000 years ago about how growth became the enemy of prosperity.

Throwing Rocks at the Google Bus is the newest book of Douglas Rushkoff and it relates why the digital economy has gone wrong. Everybody knows it, but no one knows quite how to fix it, or even how to explain the problem. Workers lose to automation, investors lose to algorithms, musicians lose to power law dynamics, drivers lose to Uber, neighborhoods lose to Airbnb, and even tech developers lose their visions to the demands of the startup economy.

Douglas Rushkoff argues that it doesn’t have to be this way. This isn’t the fault of digital technology at all, but the way we are deploying it: instead of building the distributed digital economy these new networks could foster, we are doubling down on the industrial age mandate for growth above all. As Rushkoff shows, this is more the legacy of early corporatism and central currency than a feature of digital technology.

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CNN- Facebook Needs More ‘Human’ Bias

Read this piece at CNN.com

Facebook’s PR department has been busy defending itself against allegations from an anonymous, disgruntled employee that editors of the company’s “trending stories” list were biased against conservative viewpoints. The story — itself a trending topic today — may say less about the failings of biased human intervention, however, than the need for more of it.

According to the employee’s allegations, stories quoting conservative stalwarts such as Glenn Beck were being rejected by Facebook’s human reviewers because “it was like they had a bias against Ted Cruz.” We might as well use that argument to explain the entire news media’s coverage on Donald Trump over every other candidate, and every other important story this election cycle.


Supporters of Cruz — just like supporters of John Kasich and Jeb Bush, or Hillary Clinton and Bernie Sanders for that matter — are still stunned by how Trump has monopolized media coverage over the past year. But the reality TV star’s ability to trend on social media, including Facebook, has less to do with leftist human intervention than the embedded biases of these technology companies’ algorithms.

No, these platforms are not biased against conservatives, but against low traffic.


Social media is not configured to generate a balanced perspective on politics or anything. It has one and only one purpose: to generate attention, eyeballs, likes, reposts, and tweets. Facebook’s algorithms are programmed to spot posts that are inflaming or titillating people, and then help those stories gain even more traction by highlighting them in people’s newsfeeds and the site’s list of trending topics.

The result — what’s known as “power law dynamics” — means that one or two stories dominate, and the rest are seen by almost no one. It’s the same property of digital media that leads to the winner-take-all pop music scene, where there are a handful of superstars like Taylor Swift or Beyoncé and the rest make a much more modest living. It’s not that record producers are biased against one sort of music or another. It’s that the digital platforms on which music is played and sold tend to magnify existing trends.

In social media news, that trend is always going to be novelty. Things gain attention — they “go viral,” to quote my 1994 book –– because they provoke an immune response. We humans are hardwired to pay attention to things that are weird, different, and potentially threatening.


A car crash leads to rubbernecking, even though road signs are probably more important to the trip. Likewise, the radical novelty of a candidate banning Muslims, insulting someone’s wife or building a border wall will generate more social media attention than someone talking about policy. When Mexico’s president likens Trump to Hitler, he gets more attention than Glenn Beck calling him out for not being a true conservative.

Facebook’s human reviewers work in what amounts to a boiler room, where the trending topics list is curated and peppered with additional, potentially viral hits. This is less about mitigating the harsh, extremist, or sensationalist results of headlines derived by algorithms than enhancing them. Did the machines miss something? Do we need a human interest story in there to balance out the ISIS beheading?

Make no mistake: Facebook is not a news bureau. It is a business plan. The object of the game is to win traffic from Google, Amazon, Spotify, and CNN. Its algorithms don’t just exploit the natural human failing for sensationalist novelty; they amplify and aggravate it.

A staff of sensible, thinking, human curators could compensate for runaway algorithms and the charged rhetoric they demand and inspire from us all. Instead of defending itself against charges of human bias, Facebook should start using and celebrating it.

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FastCo – When The Data Bubble Bursts, Companies Will Have To Actually Sell Things Again

Read this piece at Fast Company

How can a company with no revenues still make money? It’s not a trick question. The answer is at the very foundation of the digital economy: advertising.

No matter how dire things get for musicians, writers, movies, websites, smart phone apps, video games, or whole social media platforms, no matter how hard it might be for companies to charge for content, services, or convenience, almost everything we are doing in the digital marketplace can serve as the advertisement for something else. The video game promotes a movie, the movie promotes an app, and the app promotes a video game. Heck, this article indirectly promotes a book.

The trouble is, if everyone is in it for the advertising dollar, who is left to advertise? At no point in history has advertising, marketing, and research ever accounted for as high a percentage of GDP, or total economic activity (and that’s being extremely generous). But right now, it’s pushing at the very top of that range. The reason it can’t go higher is that only so much economic activity can go to promoting the rest of our economic activity. The coming crash in the tech market—and quite possibly beyond—will be triggered by the growing realization that every company in the world can’t be a marketing company.

From the looks of it, this simple math has not trickled up to the leaders in venture capital or the investors in NASDAQ’s tech giants. As they see it, just because a retail business sells products at a loss doesn’t necessarily put it in a worse position—financially speaking—than any other Internet platform, smartphone app, or GPS utility that takes little or no cash from its multitude of users. The goal isn’t to earn revenue, but to sell the whole company to an acquirer or Wall Street . And in the current landscape of pitiful revenue, the fantasy “big data play” has become the holy grail of exit strategies.

So instead of earning revenue, these companies harvest user data. In theory, every user interaction can be sold to market researchers looking for better ways to target audiences, craft messages, categorize psychographics, and predict behaviors. The potential upside of all this data far exceeds the pennies one can collect selling something, or so the logic goes. It makes sense in a world where no one has money to spend online, anyway.

It certainly works, at least in the short run. Musician and producer Jay Z, for instance, figured out early on that he could make more money in data than music. So he gave away an entire album to his fans, only it was in the form of an app, a piece of spyware, that monitored their usage patterns and upsold the associated data to Samsung to do with or sell as they please.

Even on e-commerce sites, in many cases the profitability of retail transactions pales in comparison with that of the big data they leave in their wake. Creating relationships with consumers is really just about engendering enough trust to get them to share their data assets with you.

Producers of everything from culture to products have to be tuned to—if not entirely geared toward—reaching easily identified social audiences. This is not a soft science, like determining the audience for a printed magazine or market for a new style of blue jean. It’s hard data on engagement. Our products—my books, this website, your mutual fund advisement services—will be less valuable as goods and services than as the means through which we accumulate followers on social networks, whom we then sell to brands. So our goods and services better be brand-friendly and our markets pre-selected for their data richness.

Even social media deserves a better role in our lives and businesses than this.

Furthermore, unscrupulous website owners have now learned to use robotic ad-viewing programs to juice their revenue from pay-per-click advertising. Most of these bot programs run secretly on the computers of everyday users in the form of malware, a kind of mini-virus that co-opts a computer’s processing power. Bots now comprise an estimated 25% of all online video ad viewers. That means up to a quarter of all the data out there isn’t even about humans.

In 2015, advertisers lost approximately $6.3 billion in pay-per-click fees to these imaginary viewers. Consider the irony: malware robots watch ads, monitored by automated tracking software that tailors each advertising message to suit the malbots’ automated habits, in a human-free feedback loop of ever-narrowing “personalization.” Nothing of value is created, but billions of dollars are made.

Eventually, social branding has to run out of fodder. As more and more markets lose all revenue potential except what they can make as social media marketing platforms, who is left to buy all this marketing and consumer data? Especially when it’s about robotic ad-clicking algorithms that don’t ever buy anything themselves? Consumer goods like soap and potato chips may have been able to keep mainstream broadcast television alive with advertising, but they cannot support the multibillion-dollar valuations of Silicon Valley and the future of the entire digital economy.

No, instead, companies are going to have to begin to venture into the perilous, experimental, and highly speculative option of charging people for stuff. Think HBO. It’s a radical approach to goods and services in which people pay directly for what you’re offering.

If what you’re doing has any value at all, it deserves to be supported by your customers. If you’re counting on the ads to take up the slack, you may be out of luck.

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Live at the Hammer Museum – The Promises and Perils of Digital Technology

Footage from this week’s talk at the Hammer Museum in Los Angeles is now available:

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The Best of Our Knowledge – How Growth Became the Enemy of Prosperity

Listen to this audio podcast at To the Best of Our Knowledge

Wasn’t the digital economy supposed to help all of us gain access to meaningful work? Computers would do the boring jobs while people did the stuff that matters. Instead, we’ve got workers replaced by robots and taxi drivers losing out to Uber. What went wrong? Media theorist Douglas Rushkoff has a word for it: growth.

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Medium – Amazon is Just Walmart on Digital Drugs

Read this interview at Medium

In December 2013, a group of protestors in Oakland, California attacked a private Google shuttle bus that was taking Google employees from their Bay Area homes to their offices at Google’s headquarters in Mountain View, 40 miles south. The protestors smashed one of the bus’s windows and blocked the bus from moving forward, holding up a banner that read “FUCK OFF GOOGLE.” The protestors also handed out flyers to the frightened Google employees that read, in part:

“While you guys live fat as hogs with your free 24/7 buffets, everyone else is scraping the bottom of their wallets, barely existing in this expensive world that you and your chums have helped create.”

The protestors were upset that their neighborhood was being gentrified by the affluent tech workers, forcing longtime residents to leave their homes and apartments because rents were becoming unaffordable.

Author Douglas Rushkoff’s latest book draws its title from this incident, which was one of many turf clashes between Silicon Valley commuters and working class residents throughout the San Francisco Bay Area in the last few years. In Throwing Rocks at the Google Bus, Rushkoff examines the reasons why the digital economy — which was touted as a great democratizer — has left so many people behind, including even those within the tech industry.

It’s not that digital technology failed us, says Rushkoff. Instead, the problem is that technology has been deployed in a such a way that a precious few people at the top of the food chain profit immensely, leaving the other 99 percent “scraping the bottom of their wallets.” In fact, argues Rushkoff, digital technology can actually be part of the solution to equalize the kind of disparity that makes people mad enough to throw rocks at buses. In his book, Rushkoff lays out a vision for a sustainable prosperity system he calls “digital distributism,” which makes use of the kind of peer-to-peer mechanisms that power Uber and Airbnb in a way that “optimizes the economy for the velocity of transactions between people rather than the accumulation of capital from people.” The role of blockchain technology to enable peer-to-peer transactional networks figures heavily in the brave new digital distributism world, says Rushkoff, because it allows individuals and small groups to route around the rent-seeking gatekeepers who corrupted the eco-system in the first place.

I interviewed Rushkoff by phone in March 2016. The transcript below has been lightly edited for clarity.

Why are people throwing rocks at the Google bus? The folks at Google are making all these great tools to use, and it doesn’t cost anything.

The people throwing rocks at the Google bus may not have as a coherent or rigorous an approach to the Google problem as the original protesters. The original protesters, the ones who just lay their bodies in front of the Google buses and tried to make people aware of the problem that Google poses, are San Francisco residents who are distressed that their rents are going up, that local businesses can’t afford to work in San Francisco anymore and that Google’s employees really just use San Francisco as a bedroom community and then commute off in these private buses that use public bus stops off to the Google campus where they make a ton of money.

It’s a reality to the local residents that the promise of the digital economy and companies like Google, which was to make us all wealthier, to give us all a leg up, has not been realized. Instead, really, the disparity of income between the wealthy and the poor has gotten exacerbated by these companies. The Google bus really just epitomized the way that these seemingly alien companies come and land on San Francisco and change the environment and the economy radically, but don’t distribute wealth to the people who are actually there.

Are you saying that no one benefit from this kind of growth?

Well not no one. There’s someone who does. The one billionaire out of a million startups, he does well. But the chances of doing well in this scheme are probably less than when you take your welfare check and go to the bodega and buy a lottery ticket. The point I was trying to raise is that, yeah, we could be angry at the people on the bus, but the people on the bus aren’t necessarily the problem. They are kids who know computer science or who know some code and who are trying to hang on to a job at Google for two or three years until they burn out. They’re just trying to get by as well, even if they’re making a hundred thousand dollars now, they know that five years from now they may not be able to or their skills will no longer be … they won’t know the language, whatever language is being used.

I really look through the chain of decision making. You can even look all the way to the CEO of Google which is now, I guess, Alphabet, really a holding company instead of Google. The CEO is obligated to shareholders who actually own the company. The shareholders are people like you and me who have a retirement plan somewhere with a S&P 500 fund of which Google is some part. Where do you point the blame in this? It’s not really at any of the individual humans involved or maybe it’s equally at all of them, but at an operating system, that is really incompatible with the world in which we live in.

What do you mean when you say that corporations are programs?

I mean it in a couple of ways. Most obviously, the people who are doing startups, the developers who are coming up with these new ideas, they’re really happy to disrupt one industry or another. Like, “Oh, I’m going to create an app that disrupts publishing. I’m going to an app that disrupts taxis. I’m going to create an app that disrupts journalism.” Then, what do they do with this great, disruptive app is they run to the equivalent of their daddy at Goldman Sachs or Morgan Stanley and they end up participating in the most conservative status quo industry of all. Really the biggest and baddest industry of all of them which is Wall Street. They surrender their idea.

When you see the founders of Twitter on the floor of the stock exchange getting to ring the opening bell and you see all of the traders and billionaires applauding them, that’s not because they’ve done something disruptive. It’s because, if anything, what they’ve done is affirmed the centrality of venture capital to the whole system. No, it’s the opposite of disruption at that point. That’s really because they’re not recognizing that this operating system of corporate capitalism is itself arbitrary. It was put in place. In the book, I go back to when was it invented and what was it invented for.

To make a long story short, it was really invented in around 1100 or 1200 at the end of the medieval marketplace. It was invented, really, to squash the competition that the middle class and all of this peer-to-peer trading was having on the aristocracy who really hadn’t worked in hundreds of years. They invented this operating system, which is central currency and the chartered monopoly, which is really just the corporation. They invented that in order to prevent small businesses and independent craftspeople from competing in an effective way. The only way to really have a business is to get capital. We call it capitalism. Capitalism — it’s not that capitalism is so evil — but when you take that system and then you put it on a digital platform, now we have an operating system sitting on another operating system. What ends up happening is it amplifies the role of capital in the equation.

There used to be what we call the “factors of production.” There were always three factors of production. There’s land, there’s labor and there’s capital. But in the scene that we’re in, when you have venture capitalists coming in and pretty much telling developers what to do with their company, then land and labor don’t really mean as much. We see labor really exploited. We see the land really mistreated and we see capital growing. That’s actually become more of a problem than it is a solution.

I want to get to the heart of your book and talk about your proposal for an alternative to digital industrialism. It’s something you call digital distributism. It’s an attractive scenario.

It is and I don’t even mean it in a utopian way. I just mean it, really, there is something we can do other than industrialism on digital steroids, which is what we’re doing now. Amazon is just Walmart on digital drugs. Uber is just a digital version of the same, old, kind of one-size-fits-all, industrial capitalism and to squash labor and destroy neighborhoods and all that. What could we do instead? What I’m arguing is that it’s the opposite of what the MIT economists argue. They say we’re moving into a second machine age, which is a really reactionary approach. It’s saying, “Everything stays the same except now the machines are going to be digital.” If that’s the case then we’re really going to just drive ourselves off a cliff. We can’t just accelerate those processes.

What I’m looking at is, rather than this being a kind of industrial revolution, what if this is more of a Renaissance? Which is really just the rebirth of old ideas in a new context. When you look at it through the lens of a media theorist like McLuhan or a technology theorist like Mumford, what you would see is that when you get a new technology or a new medium, what happens is you retrieve the values that were really buried the last time out. If the internet is the biggest medium since the printing press, which a lot of us would argue it is, then you’ve got to go back to the printing press and say, “When the printing press came out, what values were retrieved and what values were repressed?” What was repressed the last time out with the invention of the printing press and industrialism and corporatism and central currency, were the peer-to-peer values of the bazaar. The medieval marketplace, the hands on, crafty, artisanal, guild-driven economy that was so threatening to the aristocracy that they had to stamp it out.

If it gets retrieved, then what does that look like? The people who really described it best it turns out were … these are people that McLuhan himself really referred to a lot, were the catholic priests of the 1800s and the 1900s. They invented a concept that they called distributism. The idea of distributism is not, as Bernie Sanders might say, it’s not that you redistribute the spoils of capitalism after the fact. It’s not some kind of socialist redistribution of wealth. What it is is a pre-distribution of the means of production. What they were arguing was that workers should own the tools that they need to create value. In those days, it could look like the workers own their shovels and their pickaxes, the actual tools. The baker owns his oven.

What does that look like today? We can all own our computers, but we can’t really own the networks on which we do all this, but we can distribute ownership of these networks. We could have what would be called platform cooperatives, which would just be like a version of Uber, where the drivers own half of the company, or a third of the company, where you would distribute the actual shares of the company to the people who are working in the company or to the places where that company is actually operating.

What I see is the brighter possibilities of a digital economy would be to retrieve those peer-to-peer mechanisms, to look at how we optimize the economy for the velocity of transactions between people rather than the accumulation of capital from people? The accumulation of capital, that’s the industrial game, the S&P, you just make your corporation grow bigger. I think that’s reached a point of diminishing not just diminishing returns, but destructive returns. Corporations have gotten too big for their own good. That’s the big problem if you talked to most CEOs today, is their corporations have a ton of money, but they don’t know how to deploy that capital, they don’t know how to make money with money. Even Google has become a holding company because it’s in the financial realm more than it is the technological realm. It needs to buy other little companies that still have the ability to innovate.

In digital distributism, what you end up in is an economy that’s really looking at how do, I as a company, make other people rich? It’s a bit like when YouTube lets people who upload videos, they retain some of the money that Google gets from advertising on top of your video. It’s looking at that as the starting point to understand that in a digital economy, in a network economy, a network society, you can’t make your customers poor. You can’t just extract from that or you end up with no customers.

That’s the problem that Walmart has. Walmart has made so many towns bankrupt through the way that they operate that many Walmarts are going out of business because they no longer have customers who are wealthy enough to even shop at a Walmart. That’s the problem. Instead, what a digital business would look to do is how do I create a company? How do I create a model that not at my expense, but how does my very business model make the people who interact with me wealthier? That’s when you start to see oh, there’s this other economic reality that’s so much more consonant with the way digital networks actually function.

How do local currencies fit into this vision?

We are seeing a rise of local currencies in places beyond Ithaca and the other cool, coastal, progressive communities that do these things for fun. You see local currencies in use in Detroit and Lansing and a lot of bankrupted places — in Greece where the euro is too expensive, they create online favor banks where people can just do things for one another. Again, people say, “This is communism,” or something. It’s not communism. It’s economics. All that you need for a working economy are people with needs and people with skills. They just need a way to transact.

Barter is a bit too primitive because you might not want to do exactly the thing that the person you want something from wants. Local currencies and even some of these blockchain negotiated currencies can function as a way to establish trust in these communities. If they’re not really local, you can begin trading in a peer-to-peer fashion that way. I see great hope in, and people make fun of it, but in artisanal beers and artisanal yams and community supported agriculture. These activities, it’s not just hipster insanity, but this is people actually making things. That’s to me what digital means. Digital refers to the fingers, so when people actually get involved in making something and selling it themselves to somebody else, that’s a real possibility.

Distributism is apparent in crowdfunding, particularly local crowdfunding, where you can see a town invest in the expansion of a restaurant. That happened in my town where people paid a 100 dollars in advance to get a 120 worth of food at an expanded restaurant. We ended up getting a 20% return on our money which is better than we could do on the market, certainly in that amount of time. The restaurant gets money cheaper than it can get from the bank, because it pays it back in food and services. It was a way a capitalizing a business locally. We got great returns and we got to see the fruit of our investment. It made our downtown better.

The other thing I’ve seen a lot of is bounded investing, which is investing less in completely foreign things and more in things that actually benefit you. I got the idea from looking at what the steel workers were doing. The US steel workers’ retirement fund. They used to invest all in the stock market and they didn’t really do so well. They were looking for alternative investments and they thought “why don’t we just invest in projects that hire steel workers? Even if those projects fail, at least we’ll have jobs.” Of course, the projects did fine, so then they end up getting the same dollar twice.

That’s really the basic principle here. Instead of investing something once and seeing it get locked away in share price, why don’t you invest it in a way that you get to see that same dollar once, twice, three, four, five times, that same dollar? That’s the equivalent of earning five dollars, if you get to see that same dollar circulating through your own tollbooth five times, that’s all you really need. It’s an opposite way of looking at money. It’s not about getting the chips off the board, it’s about getting as many chips onto the playing field as possible.

And it’s basic economics, is the thing. Most economist and business people, they don’t recognize this because they’ve accepted the program of corporate capitalism, the way it was delivered to them. They’ve accepted the landscape. It is as if they’ve opened the Wall Street Journal today and said, “This is a preexisting condition of nature.” And it’s not. You’re coming in on a story that’s already in motion.

I always love when companies, especially finance companies, talk about, “Let’s gamify this.” Dude, it’s already gamified! It’s already all the stocks and bonds and instruments. Then, derivatives of derivatives of derivatives, that’s games on top of games on top of games. Where we’ve gotten is to this very obvious point where the game is no longer serving humanity. What we have to do is we have to serve team human, that this is about the people. The soft and squishy, little, pink flesh and brown flesh humans that are living in and amongst these operating systems. That once it’s human serving the operating system instead of the operating system serving the humans, that’s when we have to reconfigure the system. That’s really what we’re in the process of doing, only it’s really hard to do that from central command.

If the President asked me what they should do, it would be something really as simple as start taxing capital gains more than you tax regular earnings. Right now, our taxation system is designed to discourage people from earning money with a job or earning money by creating value and to encourage people to make money simply by having capital. That’s the problem. We’ve got to reverse that on a policy level, but until we do, it’s a matter of scaling down. When you create a business, think about not how is this business going to scale up but how can it scale down? How can it stay the size? How can I avoid taking venture capital? How can I avoid having those guys with money become the boss? Because they’re going to make me take my great idea for an app, my great idea for a website, and they’re going to make me pivot to something very, very different, because the object of the game for them is not to create a sustainable company. The object of the game for them is to create something you can sell.

How can blockchain technology help people have more of an ownership stake in what they do for living?

The beauty of a blockchain is really, it’s so much more profound than bitcoin itself. The underlying technology which is really … I studied it and studied it because , I really wanted to understand what it was. Do you remember [the encryption application] Pretty Good Privacy [PGP], and the way you can verify where email’s coming from with a token? It sort of works like that, only it kind of stacks them up. It’s really just like PGP authentication of yes, we really did this and then the world witnessing it to make this ledger. Once you have that ability, you can authenticate almost anything. The drivers of an alternative Uber could authenticate how much they’ve driven their cars in order to divvy out how much of the shares should they own.

There are now corporations that are basing themselves on the blockchain principle because you can pretty much write in whatever rules you want into the block chain and then establish who’s done what, if you’re going to create a big collective project or something. The trick with the blockchain, though, is to remember that the blockchain does not create trust between people. The blockchain substitutes for trust between people. If I were working on a collaborative enterprise with twelve of my friends, I would hope that we wouldn’t need to use the block chain to verify what we’ve all done. Can you imagine if the writers and people on Boing Boing, if it’s like how much do you get of this? How much do I get of it? We’re going to authenticate this on the block chain to make sure that we’re all being honest here. That would be kind of sad.

I do think it’s a great way for giant community projects. If we were going to do some for-profit or even just … It doesn’t have to be a for-profit, but a company where we’re going to make money even as wages, but it’s like on the scale of Wikipedia that’s going to be some big project. Or we’re going to make I’ve got this great idea for software and I’ve got a hundred partners from a hundred countries, then yeah, we could use a blockchain to create our contractual agreement and to verify the work that everybody’s done. Then, it’s this beautiful thing. I could see the Mondragon cooperatives using a blockchain, because they have tens of thousands of employees who are a part of this thing.

For most of us, we don’t need these high tech solutions to our business problems. For most of us, it’s really a matter of just working on something that we want to stay alive. The model that I’m really promoting is the model of the family business. Corporations hate to hear this, but family businesses do much better on pretty much every metric in the long term than shareholder owned businesses. Shareholder owned businesses always mock family businesses that it’s small, it’s nothing, it’s stupid, but family businesses are optimized for the long term. They’re optimized to be sustainable. The only time they don’t do as well as shareholder owned corporations is during boom cycles, during bubbles. If it’s not a bubble and, frankly, you don’t want to grow during a bubble because then you’re part of what pops. Family businesses do much, much better in downturns, because they’re geared for the long term.

As you approach whatever it is you’re doing, you have to think “do I want to be like a traditional corporation, a shareholder owned corporation, where the object of the game is to earn and extract enough money from this business, so my grandchildren can inherit enough cash to live their lives? Or do I want to create a business that’s healthy and sustainable enough that it can generate revenue and opportunities for my grandchildren who hopefully will want to join that business?” The latter is the sort of approach that creates a business that wants to befriend communities. It’s your name on the thing. You don’t want people to hate you the way they hate Uber because that’s you, that’s your kids, that’s your family name, that’s your legacy. You have such a different relationship to it that you start to think of your neighborhood as a legacy and the planet as a legacy and your grandchildren as a legacy and your workers as a legacy. That is who you are. It’s so much more integral than this fractious and abstracted business landscape that we’re seeing die today.

It’s interesting when you hear VCs who are evaluating companies use the term “lifestyle business” in a disparaging way, like it’s beneath their notice and they have no interest in it because it has no value to them.

Right. It’s suspicious to them. This company is treating its employees too well, this is a problem. That’s because they have a purely extractive, industrial age understanding of how business works. The way we save money is by cutting the bottom line. What I’m doing is saying, no, no, no. The way you save money is by cutting out those shareholders. You don’t need them. The less money you take, the less money you have to pay back. These folks are making money by gaming the financial system. It has nothing to do with your company and the value you create in that thing that you do.

Real business actually does better. The companies actually do better who pay their employees more. Costco does better than Walmart. Winco, the new competitor to Walmart out west, which is a worker owned cooperative is beating Walmart at its own game. They’re having better employees and better customers. Walmarts are going out of business where they have to compete with Winco, which pays its workers more, has better prices, has better relationships with their communities, because they realized wait a minute, “what if we actually make a better business?”

This idea that you’re going to always be undercut by somebody who’s treating their employees worse, who’s buying worse products, who’s outsourcing to China, that’s a fiction, that’s not actually real. The moment people realize that, then they realize we actually have the competitive advantage. We, local human beings, have the home field advantage on planet Earth. We actually do. We have the home field advantage and the foreign, alien, abstracted corporations, they’re not natives and they will lose.

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Big Think – Are Google, Uber, and Digital Companies Trapped by Colonial Economics?

Watch the video at Big Think

Douglas Rushkoff joins the rank of French economist Thomas Piketty in expressing skepticism about free market capitalism in the digital age. Groundbreaking companies like Google, Amazon, and Uber operate using a “scorched Earth” method of value creation, says Rushkoff, which resembles 13th century colonialism. To make money, they extract value from communities rather than create it, much like conquistadors would extract precious metals from South American nations. If that sounds like a hyperbolic statement to you, you are probably not alone.

But Rushkoff points out that for all our fascination with digital companies, they have yet to make up more than four percent of the real economy, based on gross domestic product. They are not, strictly speaking, very good at creating value. Because they offer services to millions — even billions — of people, it appears they have value, but, Rushkoff asks, what value are those services adding to local communities? Often times, very little. They are, like Walmart, creating a vacuum in which local businesses struggle survive.

It is not that companies like Amazon or Walmart are misanthropic, but that our financial system rewards their method of creating value. Banks grant loans based on a business’s ability to extract wealth from a community, not on whether it make positive a positive contribution to a neighborhood. There is another way, says Rushkoff — a way that’s good for banks, businesses, and local communities…

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Boing Boing – Amazon is Just Walmart on Digital Steroids

Listen to the audio podcast at Boing Boing

I’m a research director at Institute for the Future, and I interviewed author Douglas Rushkoff about his latest book, Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity. It’s a terrific look at the way the current system of wealth creation is rigged against everyone but the financial gatekeepers at the top of the food chain. More importantly, he offers some great suggestions for ways to make the system more fair for everybody.

As you approach whatever it is you’re doing, you have to think “do I want to be like a traditional corporation, a shareholder owned corporation, where the object of the game is to earn and extract enough money from this business, so my grandchildren can inherit enough cash to live their lives? Or do I want to create a business that’s healthy and sustainable enough that it can generate revenue and opportunities for my grandchildren who hopefully will want to join that business?” The latter is the sort of approach that creates a business that wants to befriend communities. It’s your name on the thing. You don’t want people to hate you the way they hate Uber because that’s you, that’s your kids, that’s your family name, that’s your legacy. You have such a different relationship to it that you start to think of your neighborhood as a legacy and the planet as a legacy and your grandchildren as a legacy and your workers as a legacy. That is who you are. It’s so much more integral than this fractious and abstracted business landscape that we’re seeing die today.

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