book_chapter/chapter_12.txt

Chapter 12 
The worldÕs best business model
Get readyÑas a special bonus, weÕre going to tell you about a seldom discussed business model which, if you can pull it off, will yield an entrepreneur untold riches. ItÕs already been proven by a wide variety of successful companies, including Google, Facebook, banks and financial institutions, advertisers, and many others. Some might consider it slightly unethical. But, if you can put that aside, we can pretty much assure you it will work and that there is no practical way somebody can come after you for it. Go for it. You can thank us later. 
HereÕs how it works. First of all, remember the worldÕs very first computer crime? It was a programmer at a bank who was trying to compute the interest on bank accounts. There was roundoff error of a fraction of a cent. He suddenly realized that he could write the program to transfer that fraction of a cent from every customerÕs account to his own account. The customer would never miss a fraction of a cent. The bankÕs balance sheet would add up at the end of the day. There would never be any money missing that somebody would try to track down. Voilˆ! Instant riches! They only got the guy when he made the mistake a lot of criminals do: he started spending lavishly and the tax guys started to wonder how he was able to do it on such a modest salary. We call this model aggregation of microtheft. 
When you speak to executives of large corporations, they are usually very proud of their Òbrand equityÓ, the trust that they say consumers place in the recognizability of their brand name and their reputation. But are the companies deserving of such trust? 
Actually, yes and no. If you put $10,000 into your bank account, you can certainly trust the bank not to abscond with all the money. But can you trust the bank not to steal $10 from you? EverybodyÕs had the experience of finding an unexpected $10 Òservice chargeÓ on their account, where the service in question is in fact rendered only to the bank, not to the customer. You can try to call them up and complain, but that has little hope of success, and is guaranteed to cost you at least a half hour or more of your time, worth at least another $10. Congratulations. YouÕve just been micro-mugged. 
In general, companies can be trusted not to commit grand larceny, but petty larceny is an integral part of their business model. 
Aggregation of microtheft is much easier to pull off if what youÕre stealing is intangible, like the customersÕ time on a phone call. For companies like Facebook and Google, youÕre not the customer: youÕre the product. FacebookÕs ÒproductÓ is the content produced by all their users, who are not being paid for it. ItÕs the ÒeyeballsÓ of their unpaid users being sold to advertisers. GoogleÕs search engine works so well because it leverages the work done by millions of unpaid webpage authors who create web links that Google can mine for popularity. 
Facebook and Google do deserve some credit for being a central place where this kind of aggregation can occur, and for providing user interfaces and algorithms that can take advantage of it. But, by the standard of labor that it takes to produce value, they certainly donÕt deserve to reap all the rewards. The number of manÐhours spent by the people who contribute to Google and Facebook would certainly dwarf those of the corporate employees. ItÕs just that each individual contribution is so small that society has not been able to make any practical mechanism to assure that individual contributors get paid. So each fraction of a cent accumulates to the aggregator. Sound familiar? 
Advertising is itself aggregation of microtheft. It is theft of attention. (One could argue that just looking at ad-supported media is implicit acceptance of an attention-for-content trade; but like software EULAs, the degree of actual consent is debatable. Certainly something like a street billboard implies no consent). 
You can understand this by analogy to the crime called identity theft. Why is identity theft a crime? Well, identity is all you have as a human being. If you steal somebodyÕs identity, you can steal all their money, and they have nothing left. It took a while for society to recognize identity theft as a crime and pass laws against it. 
Likewise attention. Like identity, from another point of view, attention is all you have. If somebody steals your attention, you canÕt pay any attention to anything else, and you have nothing left. ItÕs just that the amount of attention stolen by advertising is so small that most people can ignore it. Attention theft is not (yet) a crime in our society. Maybe it will be. 
Advertising can also be considered microfraud. ItÕs not as bad as outright (macro-)fraud. We do have laws that prohibit patently false statements in advertising (but these laws are not often enforced) and control what advertising can say (but not strongly enough). ItÕs ÒmicroÓ in the sense that advertisers always seek to exaggerate, mislead, and insinuate, but theyÕre usually careful not to make their misstatements so blatant as to trigger the laws against fraud. 
Advertising causes us to make purchasing decisions that arenÕt really in our best interests and sets us up for disappointment. As such, it has a negative impact on the value we receive for the products and services we buy, so it has a net negative impact on the economy. 
In Jailbreaking, we used the example of advertising to illustrate how advertisers use vendorsÕ fear of competition to cajole them into spending money on ads, even when it manifestly doesnÕt increase sales or market share. This isnÕt a small thing. Direct spending on advertising in the US was around $200 billion [Statista 2015]. 
Ads do serve two purposes. The cooperative purpose is to match buyers and sellers, and in the event of a successful match and the buyer appreciating the product, they are positive. But now, we have resources like consumer forums, third-party review sites, collaborative filtering, comparison shopping agents, etc. that can serve the function of decision support for purchases, and are less biased. 
The competitive purpose is to trick the consumer into spending more than their legitimate needs and desires would warrant, and often result in dissatisfaction with the purchase and unnecessary depletion of the consumerÕs resources. Ad agencies spend untold effort on just this trickery. In these cases, the entire cost of the product should be counted as waste caused by advertising, because it shouldnÕt have been produced and sold to that person in the first place. It also distorts the price signal to producers: sales goosed by advertising result in overproduction of goods, which can only be sold by more aggressive advertising, in a vicious cycle. The consumerÕs time watching the ad, and opportunity costs for both producers and consumers should also appear in the negative column. ItÕs just that nobody can be held responsible for the microfraud of advertising, so thereÕs no easy way to recover from it. 
One traditional mechanism that is supposed to address the problem is class-action suitsÑin theory a group of victims of microtheft or microfraud could band together and sue the aggregator. In practice, class-action suits are a joke. 
Except in isolated cases, they have been completely ineffective in dealing, say, with environmental problems. Members of victorious classes in class-action suits against faulty products generally receive only token compensation. As in other legal matters (see Justice), the only true victors are the lawyers, who get outrageous fees. YouÕre the victim of microtheft again, only this time, itÕs at the hands of the lawyers. 
We think aggregation of microtheft is one of the central bugs in classic Capitalism. Like we saw in the PrisonerÕs Dilemma, itÕs yet another instance of how a mechanism that seems locally plausible (aggregation) can result in a globally poor outcome. ItÕs hard to imagine what kind of specific laws or regulations we might pass that might effectively outlaw aggregation of microtheft. Solutions will have to await the larger transformation of Makerism that we advocate. 
Some microtheft can be dealt with by creating alternatives to rapacious aggregators. Maybe credit unions and cooperative banks wonÕt be motivated to charge bogus service charges. Maybe peer-to-peer alternatives could replace Google and Facebook. Maybe consumers will wise up and make purchases based on third-party review sites, word-of-mouth, and recommendation agent software, thereby disintermediating advertising. We can at least dream, canÕt we? 
Anyway, now you know. If you start a successful company based on what we told you, remember: we want a cut of the profits.