Douglas Rushkoff Talks Tech, the Digital Economy, and the Growth Trap
Brian W. Ferry
"[W]e have set in place an economic system whose growth works against our own prosperity," writes Douglas Rushkoff in Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity. In the book, Rushkoff, whose previous works include Present Shock and Program or Be Programmed, maps out the failings of our digital economy. Our never-ending hunger for economic growth has become untenable, he argues, and we need to embrace a more distributed approach to growth and social justice, one that reflects the digital technologies that pervade our lives. The Voice caught up with the New York–based writer and professor at Queens College after he gave a talk at South by Southwest in Austin, Texas.
Early on in Throwing Rocks at the Google Bus, you write about how early internet users like yourself believed the digital marketplace was going to look something like the Burning Man festival — that is, a sort of equally distributed bazaar. Could you talk a little bit about why this didn't happen?
It started out that way to some extent, because we created things like freeware and shareware. We were making stuff and just letting other people have it. Compensation was usually voluntary. We were building things because we were excited to see other people use them. And what partly happened is the parents of hackers and developers, they would look at us as losers. Like we were just Dungeons & Dragons, video game kids. We were living on pizza, hanging out in garages, and we were failures. But when big companies saw that there could be something in this, they started throwing money at the kids. Taking the money didn't feel like selling out but rather getting acknowledgement from daddy. What we didn't realize was that we were surrendering these technologies to people who had very different hopes for them. One result was we ended up with this silly, strange dotcom boom.
You say at one point in the book that "social media originally appeared to be an alternative to the marketplace ethos of the dotcom era." Particularly, that some social platforms seemed to be offering up a "return to the more peer-to-peer sensibility of the early Internet. But the value systems they created instead — likes, views, reblogs, favorites, and so on — became a new kind of currency." A currency that changed how we value, or devalue, cultural products.
That's right. After the dotcom era came crashing down, everybody thought the Internet was over. But I was saying that it had just fought off its first parasitic infection. It crashed and the investors left, but they'd built the infrastructure. So now we could do social media, and I don't mean Facebook but the early peer-to-peer, connected stuff. The Internet has always been a social medium. It fought off the defense department. It then fought off business. And now it will be ours, we said. But social media companies grew extremely fast, to the point where the money people got interested again. This time they said they weren't going to make the same mistake. They said, "Look, we are going to come in and we are going to give you a bunch of money, but there are going to be very different terms." So, of course, you have these companies again that just care about capital and, more than anything else, growth.
This falls in line with what you call the "growth trap."
Yeah, that's the growth trap. And it's what all these giants companies are in, because they're obligated to grow by what their debt structure demands rather than by the demand of their market. So Walmart, for instance, its stores are going under because the towns where it operated are going bankrupt under the pressure of Walmart. It comes in, under-prices all the local businesses, and underpays its workers. Many of its workers even have to go on welfare. Thus, the town it's in actually loses money. Then, lo and behold, Walmart finds itself without customers: The customers are broke! You end up killing the goose. And it's the same thing that digital businesses are doing, but you see it happen much faster.
You characterize the so-called "sharing economy" as a farce. Uber, for instance, gets a lot of negative play in the book. At one point you say the company is the "creative destroyer of the current taxi industry." Why is that a bad thing?
The problems here are that the sharing economy occurs on corporate-owned platforms that are taking much higher percentages on the transactions than they need to, or than is appropriate. So Uber takes as much as they can to keep the drivers as poor as possible. They're doing that in order to pay their shareholders the most money possible. But I would argue that the shareholders are an unnecessary part of the equation. And with Uber, it's not able to dominate now because their app is great, but because it has a war chest. The ability to regulate the market. The ability to undercut competition.
What about publishing or the news media? Are they stuck in this same trap?
Of course they are. What's happened is the business landscape became financialized, and now non-growth industries are being asked to behave like growth-based ones. So when you see Viacom or Sony buy a book publishing company, they don't realize books have been pretty much at capacity for a couple hundred years now. This is it. This is how much people read. This is how many books they can buy. There are enough readers out there to support this many writers, this many editors, and this is how it's going to go. But they buy these businesses, or buy newspapers, thinking that somehow they are going to grow them. You can't grow them! And that's got to be OK, not to grow.
At one point, you bring up in the book how Evan Williams, the guy behind Blogger and a Twitter co-founder, has "disrupted journalism with the blog, and news-gathering with the tweet, but now he was surrendering all that disruption to the biggest, baddest industry of them all," that industry being Wall Street. How so?
Yeah, well, I like Evan a lot and Twitter is a great app, a 140-character app that makes, like, $500 million a quarter. But because they sold it to venture capitalists who then sold it to Wall Street through an IPO, it's considered a huge failure. So Twitter is going to be forced to pivot from a $500-million-a-quarter success to some type of ridiculous, winner-takes-all monopoly. And this is being done just to fool another round of investors into paying more for the shares. It has to go from a sustainable, fantastic business to something else. And that's because Twitter is obligated to grow. Why is there no option for Twitter to grow to full size and then operate at that size? Because that opportunity doesn't exist for any publicly traded company.
You talk a lot about how companies need to be reprogrammed — just like computers — to believe it's fine not to grow. But I can't imagine Wall Street could be reprogrammed in such a fashion.
Wall Street doesn't have to get on board with being reprogrammed; it just has to become less central to all the economic activity of our reality. There are always going to be big companies that need public capital. But everything shouldn't be owned by shareholders. If you look at the data, family-owned businesses do better in terms of revenue and longevity than publicly traded companies. They last longer and they make more money. The only metric where they do worse is during bubbles. But during bubbles you don't want to grow fast. If it's a bubble, you want to try and stay the same size so you're not subjected to the pop when it happens.
St. John's Red Storm Men's Basketball vs. Cal State Northridge Matadors Womens Basketball
TicketsMon., Dec. 5, 6:30pm
Tire Pros Classic - Syracuse V Uconn
TicketsMon., Dec. 5, 7:00pm
Brooklyn Nets vs. Washington Wizards
TicketsMon., Dec. 5, 7:30pm
New York Jets vs. Indianapolis Colts
TicketsMon., Dec. 5, 8:30pm
Second, digital technology is eating Wall Street. Digital technology is now gaming the system that they thought they had already gamed. The thing that hurt musicians and writers and every other business, it's now fucking with Wall Street. The CEOs that I talk to are just as concerned with the way that this is being done. They feel trapped because they can't envision an alternative. They accept the rules of the marketplace as given circumstances of nature. They don't know that these were devised by human beings at certain moments in history, with very certain agendas.
In the book's acknowledgements, you thank Occupy Wall Street. Could you talk a little bit about how that movement has inspired you?
Occupy inspired me in all sorts of ways. The biggest was probably that it motivated me to become a university professor. When I went to Occupy in Zuccotti Park, what I saw was not people protesting per se, but people engaging in what are called "learning circles." They were learning about things like alternative currency, how capitalism works, how lending works. All sorts of cool things. And I thought, this is what kids do when they want to occupy something. They basically set up a graduate school with seventy concurrent seminars. They want to get educated in a way that doesn't put them in so much debt. So that's why I got my Ph.D., started teaching at Queens College, and started a master's program in media and activism.
On the whole, do you think Occupy was a success?
I do agree it wasn't entirely successful in traditional terms. But I think it was the first prototype of a different approach to activism. It's what we call horizontalism, both a leaderless and leaderful movement that teaches mutual aid and support. You see others doing this even more successfully.
So what, in the end, are some solutions to all of this?
Help your workers participate in the value equation. Help the towns you're in. A company like WinCo is crushing Walmart, and the only difference between the two is WinCo is owned by its workers. Walmart is owned by its shareholders. So WinCo can pay its workers more and keep circulating the money. And as it does, it ends up with wealthier employees and towns. And for larger companies, I'm arguing that they seek a steadier state as well, and start rewarding their investors with dividends instead of shares.
Of course Chase, say, isn't going to change overnight. But as I discuss in the book, when a bank gives a loan to a local restaurant for expansion, what if the bank gave the restaurant half of that loan and made it get the rest from local crowdfunding? I'm advising startups to just take less money. Don't sell your business. Understand it might take a little bit longer, but if you like what you're doing, don't sell your business to people who want to kill it. And that's what they want to do. They want to destroy the business and make it pivot to do something else.
And local currencies. I'm really into those. More than Bitcoin; like the LETSystem and time-based currency. You don't necessarily need a bank to put a factory in your town. You can exchange laterally if you have a means of exchange. And that's what people have to get used to, that the U.S. dollar is not the only way to keep track of who has done what for whom, especially in the Internet age. The difference between the industrial age and the digital age is we don't have one-size-fits-all solutions anymore.
So prizing companies that offer alternatives to this system.
I'm talking about optimizing the economy for the velocity of money rather than for the conversion of money into capital. It's going from a growth model to a flow model. Why are we, for instance, taxing capital gains at almost nothing but taxing dividends and earnings so high? That's a tax policy that is meant to favor the extraction of capital and to punish the exchange of things. But you can form companies that create value rather than prevent it. So if Google, for instance, sees people making money off videos on YouTube, it should encourage that. And in some ways it does cut people in, but not enough — instead of putting ads on videos and taking all the revenue, they put ads on the videos and give back just a little bit of the money. Companies that do that are going to be more successful in a digital distributed economy. We should treat companies more like a family business, where you're thinking about the community in which you're operating, you're thinking about your vendors, and you don't want them to all be people that you're squeezing and ruining.
Get the ICYMI: Today's Top Stories Newsletter
Catch up on the day's news and stay informed with our daily digest of the most popular news, music, food and arts stories in New York, delivered to your inbox.