Amazon is Just Walmart on Digital Drugs
By: Mark Frauenfelder
Tags: Startup, Bitcoin

Amazon is Just Walmart on Digital Drugs

Author Douglas Rushkoff on a Sustainable Economy

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.

Image: Craig Frost/Twitter

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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