Posts about creativedeflation

Whither capitalism?

March 4, 2012 by Jeff Jarvis
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I’ve been arguing for sometime that technology leads to efficiency over growth and that that will have profound impact on society we can only begin to grasp. Michel Bauwens now furthers the argument, asking whether capitalism can continue. I don’t think I’ll go that far yet. But his arguments are fascinating.

Where there is no tension between supply and demand, there can be no market and no capital accumulation. What peer producers are doing, for now mostly producing intangible entities such as knowledge, software and design, is to create an abundance of easily reproduced information and actionable knowledge.

This cannot be directly translated into market value, because it is not at all scarce – it’s over-abundant. And this activity, moreover, is done by knowledge workers, whose ranks are steadily expanding. This over-supply threatens to make knowledge workers’ jobs precarious. Hence, an increased exodus of productive capacities, in the form of direct use value production, outside the existing system of monetisation, which only operates at its margins. In the past, whenever such an exodus occurred – of slaves in the decaying Roman Empire, or of serfs in the waning Middle Ages – that is precisely the time when conditions were set for major societal and economic changes.

Indeed, without a core reliance on capital, commodities and labour, it is hard to imagine a continuation of the capitalist system.

The problem is this: internet collaboration has enabled the creation of use value in a way that totally bypasses the normal functioning of our economic system. Normally, increases in productivity are somehow rewarded, and these rewards enable consumers to derive an income and buy products.

But this is no longer happening. Facebook and Google users create commercial value for their platforms, but only very indirectly. And they are not at all rewarded for their own value creation. Since what they are creating is not what is commodified on the market for scarce goods, these value creators do not receive income. Social media platforms are exposing an important fault line in our economic system.

The temporary, pop-up corporation

February 9, 2012 by Jeff Jarvis
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A stat I heard repeated all over Davos: that the average lifespan of a Fortune 500 company is now 15 years, according to Cisco’s John Chambers. Trying to confirm that figure, I found others saying the number is less than 50.

Whatever. It’s far from forever.

So what if corporations more and more become short-lived enterprises? What would that mean?

Consider that Kodak just announced that 124 years after it started, it will stop making cameras. GM and Chrysler a mess of banks would have died, if they weren’t too big to fail. Borders and and Circuit City and Blockbuster and giant retailers are dead. Whole industries are dying.

Now consider that Kickstarter just passed a key milestone: two projects garnering more than $1 million in … what do we call it? … contributions? purchases? investments? We don’t have the right name yet for orders received before a company starts and a product is made. We don’t have a name for a company founded on its customers’ capital.

I have been arguing that vertical industries will be replaced by horizontal ecosystems made up of three layers: (1) platforms that enable (2) entrepreneurial ventures to be created at low cost and risk and (3) networks (e.g., ad networks) that, when needed, bring these ventures together to reach the critical mass that firms used to provide.

Of course, enterprises today can start with no need to build factories (use someone else’s) or distribution (plenty of that, for now) or technology (use the cloud) or marketing (let your customers do it for you) or design (let your customers help) or retail outlets (they’re dying anyway) or capital (see above). We know that this new architecture of the economy means enterprises can be launched with less investment, risk, and effort.

But consider that it also means that enterprises can disappear without leaving much of a hole. The guy who made the Kickstarter-backed iPod Nano watchband, who raised almost $1 million and guaranteed himself success (so long as he priced the product right), can keep making it until it isn’t hot anymore and then just do something else. No need to worry about long-term return on investment; no need to fret over feeding a factory-full of workers. Bermuda, here he comes.

But that’s not how our economy is built. How often do you hear that the wise person invests for the long term? Well, what’s long-term now? A generation? A decade? A few months?

If this is the case, then the platforms that make this temporary economy possible — Amazon and its web services, eBay and its retail chain, FedEx and its distribution chain, Google and Facebook and their marketing power — will be the best long-term plays. That’s why VCs keep saying they want to invest in platforms. But there’s only so many of those.

Of course, the problem for VCs in the last decade has been that start-ups just don’t need them as much as they used to. That will be ever more the case. Now the rest of us will know how the VCs feel. Where can you put our money if you’re an investment fund or a pension fund or a plain investor? Where will equity grow? Will it? I wish to hell I knew.

I’ve also been arguing lately that technology is leading to efficiency over growth. That, too, means that it will be difficult to find new jobs and equity growth.

Oh, there will be wealth. Witness Facebook’s IPO. But consider that Facebook serves soon a billion people with a staff the size of a metro newspaper company and they will end up with much greater wealth in fewer hands. Technology will not solve the economic imbalance of the 1 percent but make it worse, unless you’re one of those 3,000 employees of the platform or you manage to start a new company — likely a temporary, pop-up company — on top of it.

Efficiency over growth (and jobs)

January 26, 2012 by Jeff Jarvis
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The hook to every song sung at Davos is “jobs, jobs, jobs.” The chorus of machers on stages here operate under an article of faith that growth can come back, that they can stimulate it, that that will create jobs, and then that all will be eventually well.

What if that’s not the case? I am coming to believe, more and more, that technology is leading to efficiency over growth. I’ve written about that here.This notion is obviously true in some sectors of society: see news and media, retail, travel sales, and other arenas. But how many more sectors will this rule strike: universities? government? banking? delivery? even manufacturing?

As I write this, I’m watching a WEF panel moderated by Reuters’ editor, Steve Adler, with Larry Summers and government and business leaders. They’re discussing growth strategies and so far we’re hearing the same notions we hear elsewhere in Davos, the complete trick bag: spend money on infrastructure, be nice to business, regulate less, reform taxes, reform immigration. OK and OK.

“The problems of job creation are more complicated than that. They are more complicated than wealth creation,” says one of the panelists (operating under Chatham House Rule, so I won’t attribute*). “This is a group that understands wealth creation better than job creation.” He says “there are inherent limits” to the number of people employed in various sectors.

I haven’t heard any strategy yet that reverses the trends underway in the transition from the industrial economy to the digital economy. What will offset the shrinking of vast industries? New industries? Well, we have new, digital industries, but they are even more efficient than restructured old industries. Compare Google’s staff size to GM’s, even now. Facebook serves almost a billion people with the staff the size of a large newspaper. Amazon employes far fewer people than the bookstores it put out of business did. So those new industries will bring growth, profit, and wealth, but not many jobs.

“There are fewer jobs for regular people because those innovations happened than there would have been if those innovations hadn’t happened,” the panelist says. It would be “a delusion” to think that encouraging this innovation will increase jobs.

So what if the key business strategy of the near-term future becomes efficiency over growth? Productivity will improve. Companies will be more profitable. Wealth will be created. But employment will suffer.

I’m hearing no strategies focused on this larger transition in a gathering about the transition. I think that’s because the institutions’ trick bags are empty. They ran an industrial society. That’s over. And the entrepreneurs who will create new companies but also new efficiency aren’t yet in power to solve the problem they create.

I ask the panel whether all this talk of jobs, jobs, jobs is so much empty rhetoric. I ask whether there are other tricks in the bag.

The panelist I’ve been quoting says that there are two sets of economic issues: In the short term, for the next five years, we are dealing with demand and macroeconomic policy. “Employment today has nothing to do with the Kindle,” he says. “It has everything to do with the financial system, deleveraging, and macroeconomic policy.”

It’s in the long term that the issues I’m addressing here come to bear. “For the longer term, we don’t have nearly as good answers as we would like to,” he says. “We are going to have to embrace the idea that we are going to have growing numbers of people involved in the provision of fundamental services to other people, services like health care and education. We’re going to need to make that work for society.”

That is to say, health and education don’t directly create wealth; they are services funded in great measure by taxes of one sort or another. Employing people in those sectors amounts to a redistribution of wealth with the fringe benefit of providing helpful services. Is a service-sector economy the secret to growth? Who pays for that when fewer people have jobs in the productive economy? I still don’t see an answer. This is not an economic policy so much as it is a social policy.

Another panelist says that we will have fewer people and we will need to retrain people throughout their lives for new jobs. I agree. But that doesn’t create jobs (except in schools); it just helps fill the ones we have.

One more panelist, from Europe, suggests that nations here will end up making stuff for the growing economies and consuming middle classes of China, India, Brazil, etc. In a globalized world with maximum price competition, I’m not so sure that’s a strategy for growth, only survival. I’d hate to place my strategic bets on continuing — or returning to — the industrial economy. And at some point, that strategy bumps up against the question of sustainability: is there enough stuff to go around?

Indeed, in a globalized society, we need to look at total jobs, the sum of work and productivity and demand, not country-by-country. The question is: Will jobs on the whole increase in this digital economy?

If instead efficiency increases — and with it, again, productivity and profit — then great wealth can be created: see Google, and the technology economy. But that means the disparity of income and capital will only widen yet more. And it’s just wide enough today to cause unrest around the world. That’s much of what #Occupy_WEF et al is about. That’s what is causing such tsuris and uncertainty on the stages of the world (Economic Forum). That’s what is causing the institutions represented here to fear, resist, and regulate technology in the hopes of forestalling the change it is bringing. There is the root of the disruption we’re witnessing now even in Davos.

* I saw Summers later and he gave me permission to quote him by name. He is the quotable panelist.

So much for the penny press

January 2, 2012 by Jeff Jarvis
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The New York Times raised its daily price to $2.50 today. I thought back to the penny press at the turn of the last century and wondered what such a paper would cost today, inflation adjusted. Answer: a quarter.

Screen shot 2012-01-02 at 11.09.10 AM

So, in inflation-adjusted current pennies, The New York Times today costs 10 times more than a newspaper in 1890. Granted, Today’s Times is better than a product of the penny press. But is it worth 10x? Should it cost 10x?

In the meantime, labor rates have risen (a Timesman today lives better than a Timesman then) but production technology has become far more automated and efficient (no more typesetters, proofreaders, compositors, engravers, stereographers, mailrooms, or “rubber rooms” filled with unneeded pressmen). And the advertising value of newspapers has increased exponentially.

On the one hand, there’s less competition today. The New York Times is essentially a national newspaper monopoly (the Wall Street Journal and USA Today are different beasts). That should enable it to raise its price to such a premium. On the other hand, what’s really at work, of course, is that there’s much more competition today: the entire web. That would drive the paper to lower its price.

Instead, today it raises its price — by a whopping 25% over its old daily price of $2. That’s because it is trying to support an outmoded economic model. The myth of legacy media — rich while it lasted — was that every reader saw every ad so the paper charged every advertiser for every reader. That’s how scale paid off. Those are the economics that led to the rise of the penny press.

Online, that myth has been punctured: (a) every reader does not see every ad, and (b) advertisers pay only for the ads readers see (or in Google click on), and (c) there’s abundant competition. That’s what confounds legacy media folks: “If I get more audience and have more effective advertising, why am I not being paid more?” Because you’re operating by media laws that are now outmoded. You’re still operating under an industrial economy built on scarcity. That’s what makes you think you still have pricing power.

You need to find opportunity in entirely new models, in the new scale, in abundance. Google finds value in scale by taking on risk for the advertiser (who pays only for clicks) and by increasing relevance by putting ads everywhere. Facebook finds value in relationships and data about them and it doesn’t sell content but does use content as a tool to generate more data about users and their interests.

In their day — a century ago — newspapers found new ways to exploit scale. Today, net companies exploit scale in new ways. Google, Facebook, and Twitter are the penny press of today. Only they cost even less.

BTW, thanks to the very good Times Machine, we can see that The Times started life at a penny, which rose to four cents and then back down to a penny by 1900 — because it wanted scale.

Occupy #OccupyWallStreet

November 16, 2011 by Jeff Jarvis
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It is time for Twitter and its citizens to take back #OccupyWallStreet.

I say that with no disrespect to the efforts and sacrifices of the people who have taken the hashtag literally and moved into Wall Street and cities around the world, confronting the institutions — financial, government, and media — they blame for our crisis.

To the contrary, I say it’s time to carry their work back to our virtual society, where it began, to expand the movement so Michael Bloomberg and his downtown goombas and mayors and cops cannot think that they are able throw it away in a garbage truck; so banks cannot hope to return to their old ways; so media cannot think that it can dismiss as fringe (see the BBC and the FT each calling the movement “anti-capitalist” when many of us say the real goal is to reclaim capitalism from its crooks).

It is much bigger than the scores of occupants in each city. But that still raises the question of what “it” is.

That is where I believe Twitter can grow and give shape to the movement. There we can answer the question, What are we mad as hell about (should that be a hashtag debate: #why…)? There we can organize no end of irritants for institutions (we can play whack-a-mole with the banks’ rip-off fees and leave them as customers). There we can hold politicians to account.

Some have argued that will not grow up as a movement until it becomes an institution and has leadership and spokesmen and unified goals and messages and even candidates for office.

Heaven forbid.

#OccupyWallStreet, in my view, is anti-institutional in that it is fighting institutional power and corruption and in that it is not an institution itself. I believe the value of is that it enables us to say how and why we’re angry and to make the powerful come to us and beg us for forgiveness, not to join their games.

#OccupyWallStreet, the hashtag revolution, establishes us, the public, as an entity to be reckoned with. It is a tool of publicness.

So I support becoming less literal — let Michael J Bloomberg tear down the tents — and more amorphous, more difficult to define and dismiss and shut down.

#OccupyWallStreet started on Twitter and spread to the streets. Now it’s time come back online and spread further.

Why are you mad as hell? And what are you going to do about it? That is ’ challenge to us all.