Has rampant capitalism hijacked the promise of the digital age?

Read this piece at the Australian Broadcasting Corporation

In retirement Bill Gates has become a smiling, genial philanthropist: a multi-billionaire busy giving away his vast fortune. Media coverage of him these days is almost exclusively related to his work with the Bill and Melinda Gates Foundation.

But it wasn’t so long ago that Bill Gates was a corporate colossus—one of the richest businessmen in the world with a reputation built on a strange mix of boyish charm and ruthless determination.

Those who admired Gates in the years up to his retirement saw him as a geek come good: a nerdy computer hacker who went on to help build the digital world.

Others saw a man bent on squashing innovation in the name of global software dominance. For years Microsoft battled both US and European regulators against charges of uncompetitive practice. When Gates finally stepped down in 2008, the headline in Wired read: ‘So Long, Bill Gates, and Thanks for the Monopoly.

The Gates mix of soaring altruistic rhetoric and hard-headed commerce is now widespread throughout the digital world: Amazon, Google, Facebook and Apple all adopt a take-no-prisoners approach to business, cloaked in the PR language of change, opportunity and personal empowerment.

University of Maryland legal academic Frank Pasquale, who focuses on the ethical, legal and social implications of information technology, calls them the ‘Silicon Valley oligarchs’.

‘I think the fundamental problem is that people don’t like to face up to the reality of monopolisation,’ says Pasquale, speaking about the global rise of Uber, Airbnb and other so-called sharing economy companies. ‘It’s much more convenient to believe the comforting myth that these markets are always contestable.

‘A firm like Uber is an appeal to venture capitalists—speculative capital—that wants to see massive returns via monopolisation. Let’s not mistake the business model here. The model here is for one of these firms to come in and to take over various aspects of commerce, to take over the rides that are in an area, to take over availability of non-hotel rooms to sleep in, et cetera. I think that this is really a perversion of the original aspirations of the sharing economy.’

The perils of corporate capitalism ‘running on digital steroids’

For Pasquale, the rise of the oligarchs signals lost potential—the opportunity to enhance genuine sharing and competition through the use of new technologies. But leading US media theorist Douglas Rushkoff goes one step further. In his newly released book Throwing Rocks at the Google Bus, he warns that the promise of the digital age is being hijacked by a rampant form of old-style capitalism, a modus operandi akin to that of the robber-barons of the 19th century.

‘These platforms don’t exist to help people exchange with one another,’ he says. ‘They really are scorched-earth efforts at achieving monopolies in particular industries, not in order to serve those industries or even sustain them or grow them, but in order to hop over into another industry altogether.

‘What Uber is doing to driving, or Airbnb might be doing to hotels, is similar to what, say, Amazon did to books. Amazon doesn’t care about the authors and the publishers, it just used books to create a monopoly so it could hop over into other retail sectors.

‘What I’m trying to do is really communicate to developers, especially young developers who have great ideas for new applications, [is] that when they take huge amounts of venture capital and get these sky-high evaluations, in effect they have sold their businesses to those venture capitalists who will now expect 100 times or 1,000 times return on the investment they’ve made.’

Read more: The threat Uber poses to competition and productive capitalism

According to Rushkoff, a professor of media theory and digital economics at City University of New York, the end result is an abandonment of both true entrepreneurial vision and the desire to build a long-term sustainable businesses. Rapid growth, he says, has become the raison d’etre of the start-up world.

‘What we are seeing are the same ills that we saw with traditional corporate capitalism—good old-fashioned extractive growth-based corporatism—but it’s running on digital steroids,’ he says.

‘Now it’s spinning out of control, the extraction happens much more rapidly. We also have what’s called power law dynamics … the superstars end up really getting all of the hits, all of the listens, all of the likes, and everybody else gets nothing. The internet tends to really exacerbate the divide between the very few winners in a winner-takes-all platform and [the] many, many losers.

‘These are the same problems that we see in traditional capitalism with the old monopolies of the oil companies or the railway companies, but they happen so quickly and they happen so completely that they are much more devastating to people.’

Communities left bankrupt by short-term tactics

These digital giants are devastating for economies as well, warns Rushkoff, because if you come to value capital more than people, you risk diminishing and impoverishing entire communities and exacerbating the wealth divide rather than fighting it.

‘We have digital technologies that are being optimised to convert the value that people create into share price, so that it’s captured by capital but it is not available to circulate throughout the system,’ he says. ‘That’s why we see so many communities getting poor, as the money is quite literally extracted from circulation.

‘Growth is not necessarily a problem, it could be a good by-product of a successful business. But when you have to grow in order to stay alive, it means that’s because you are in debt. It means that’s because you can’t satisfy your debt structure with simple revenue. It throws everything out of whack in such a bizarre way that these companies end up adopting these scorched-earth short-term tactics.

‘Here in America, many Walmart branches are going out of business because they’ve bankrupted the communities on which they depended. They put everybody else out of business, they don’t pay a living wage, so they’ve gotten to the point where they don’t have customers, they just have poor people living around them. That’s not a good long-term business strategy.

‘But when you are looking at quarter-over-quarter growth, when you are a CEO who just wants to get another two or three quarters of bonuses out of this and then leave, then that’s what you’re going to do. It’s bankrupting not just the people, it’s bankrupting corporate America as well.’

Our embrace of the corporate ethos and practice of Silicon Valley, Rushkoff argues, can in part be traced to the counter-cultural instincts of early online developers.

‘On the internet in the early days, in the late ’80s and the early ’90s, the people we wanted to keep off [were the] government. We really saw government as the ones that were going to censor us … and we did everything we could to get regulation and government away.

‘What we didn’t realise was that if we cleared out government completely, that corporations would come in and rule the thing. We thought there’s government and there’s people, and government is the oppressor and people want to be free. But what happened was all these corporations came in completely unregulated and really took over.’

A game where venture capital sets the rules

Another reason, Rushkoff says, was the ambition—and sometimes the greed—of early internet developers, many of whom took a lot of money in the late ’90s from Wall Street.

‘We kind of fooled them with business plans that weren’t really real, all these dot-coms and all that stuff. A lot of hackers and technologists, a lot of people, got rich off stuff that didn’t quite pan out,’ he says.

‘I think when venture capital came back again in the 2000s, they said, all right, we’re going to put money in this but we are going to do it our way this time. It turns out this is their way.’

David Glance, the director of the Centre for Software Practice at the University of Western Australia, also worries about wasted potential. He sees discontent beginning to swell around the increasingly commercial nature of social media in particular. Social media, he says, is looking old, tired, grumpy and more than a little compromised. It’s becoming much more obviously concerned, he says, about the needs of investors over customers.

‘When social media came onto the scene .. We had things like revolutions being supported and inspired by it—the Arab Spring, in particular, five years ago. Everything from commerce to love was going to be carried out on social media.

‘The truth has been a little bit different from that. Five years on from the Arab Spring, we realised that it wasn’t actually the central aspect to the revolution, that people were doing things in different ways and would have done things in different ways. It certainly played a part, and social media does play a part, but it’s not quite all that it’s cracked up to be.’

Social media in decline as commercial pressures bite

Glance says monopolistically minded companies like Facebook are responding to growing disillusionment of their customers by diversifying their offerings and by acquiring rival operations: Instagram in Facebook’s case. But he says all platforms are facing the same pressures to make money by becoming increasingly commercial, and there is growing evidence to suggest that many users no longer see social media as their main form of interactive communication.

‘People will still consume content, so I might go to Facebook and watch a few videos, as will a lot of other people,’ he says. ‘But in terms of its original promise of interacting with a network of users and basically using that as a basis of continuing conversations and interactions, it will be used far less. Messaging applications that allow people to communicate with each other one-on-one, for example, are going to continue in popularity, including even email.’

And there’s still a role for old-fashioned face-to-face communication, according to Glance.

‘It’s still far better to go out and talk to people face-to-face and interact in that way than it is to try and do that on social media.

‘You won’t see politicians necessarily giving up on going down streets and knocking on doors. Likewise with products and shops, they will not go away. Amazon, for example, are actually building bricks and mortar stores so that people can go in and look at products and are not just doing it online. I think that’s really where we’ve got to.’

Like Glance, Rushkoff also believes there are signs that ordinary individuals are pushing back against commercialism and exploitative corporate practices online. But he also concedes any change will be incremental.

‘No one is going to flip a switch or do an upgrade that makes the world great,’ he says.

‘What we have to realise is that in a digital age we have many distributed solutions. The solutions in Brisbane will be different than the ones in Sydney, which will be different than the ones in New York. We have to seize that and celebrate that—diversity of solutions is really the way things work in a distributed era.’