Monday, May 9, 2016

Decentralization, Douglas Rushkoff, and the Digital Economy

This blog has spent the last 3+ years and 150,000 or so words chronicling the demassification of media enabled by digitally networked individuals and systems. Simply put, we’ve gone from a few people telling a lot of people what they can watch or read to a veritable free-for-all in which the cost of getting into the ring is almost nil and we end up with unthinkable things like 500 hours of video being uploaded to YouTube every minute. (Note: Statistic as of early 2016, almost certainly more by the time you read this)

Decentralization is a wonderful thing as it means democratization. The trouble with decentralization, though, is it’s hard to find a place to start. In the context of music, e.g., we’ve gone from the Top 40 format of radio to the 40 million (probably more by now) of Spotify.  If you know exactly what you’re looking for, it’s great. But if you don’t, it’s less great. This truism is what’s led value on the Internet to shift from creators to aggregators. There just aren’t enough hours in the day to help us navigate the choppy waters of freely flowing content on our own.

And this is a big part of why today’s Internet looks nothing like the fledgling Internet of the early 1990s. Back then it was a combination of a technologically-enabled future that didn’t yet have a roadmap and a post-hippie playground where the cybertopian ideals of a decentralized society frolicked alongside the plans for world domination being hatched in locales such as Redmond, WA and Silicon Valley. 

And it turns out that what’s happened in between then and now isn’t that much of a new thing. Douglas Rushkoff, author of numerous books on digital culture and media in the connected era, and one of my favourite thinkers in the field, breaks the issues down in his new book, Throwing Rocks At The Google Bus: How Growth Became The Enemy of Prosperity

The title of the book comes from the Google Bus protests of 2014. These private shuttle buses were seen as odious symbols of the digital economy, transporting tech workers from their urban San Francisco homes to the suburban campuses of the big tech companies. So central to the Silicon Valley economy were/are these caravans that the closer the apartment is to the Google bus stop, the higher the rent. According to one report, proximity to the Google stop puts the premium on a 1 bedroom apartment in San Francisco at about $4000/month. 

What, asks Rushkoff, does value creation look like now? What should it look like? And how did we go from the moneyless, collectively constructed, everyone was welcome Internet to the Internet we have today? This is not about neo-Marxism, but about, as Rushkoff likes to point out, a company such as Twitter, built on 140 character tweets, making $500 million per quarter and still being considered a massive failure by Wall Street.

In the book, and at the event at which I heard Rushkoff speak, he embarks on a journey, one in search of the origin of the model of the digital economy. Where did this ‘operating system’ come from? He traces things back to the bazaar of the late middle ages, post Crusades, when a peer-to-peer economy was the order of the day. People used ‘market money’, temporary objects that had value for a day, i.e. my bundle of spice for your chicken, your piece of fabric for my jar of oil. Over time, this is how the peasants became the bourgeois. 

And nothing is more threatening to the aristocratic upper classes than peasants on the rise. Therefore, explains Rushkoff, the elites came up with mechanisms such as centralized currency, issued by monarchs, to replace the market money of the peer-to-peer economy. Then came monopolies, which made purchasing from those other than the sanctioned entities illegal. Cities became weaker, nations became stronger.

Not all that dissimilar to the Internet of today in which individual websites, publishers, and creators have, to varying degrees, become beholden to platforms and aggregators. Like they say in Las Vegas, the house always wins.

The great promises of the Internet were the removal of the intermediary and lowered operating costs, so sellers could go direct to buyers, writers to readers, musicians to fans, etc. These activities were, and still are, enabled by the Internet, but what came next was not just an abundance of creative production, but an overabundance. And what came along with that was a public generally unwilling to pay for content. You want free? You got it. But not so fast. You’ll be paying with your data instead of dollars. Not that that’s necessarily a bad thing, but it’s definitely a real thing. (I’m always surprised when people are surprised, but that’s a whole ‘nother story).

But are these digital businesses viable business models? For some, they certainly are. Facebook, e.g, with its 1.65 billion global users and $20 billion in annual revenue has an annual revenue per user (ARPU) of $12.12 according to my calculations (yes, I do such spreadsheets for fun) and is highly profitable, whereas LinkedIn is making about $2/year off of you (with the company worth about half of what it was back in 2013), Google across all of its properties that you use pulls in about $50 in advertising revenue from you annually and runs a very profitable operation, and Twitter is at $6.45 of annual revenue per user, but unable to make bank. Why? Because as a public company, funded by venture capital dollars, the name of the game is growth, and theirs seems to have plateaued.

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It’s exactly situations such as Twitter’s, with $2 billion of annual revenue and hundreds of millions of users, being considered a colossal failure that rankle Rushkoff. “I’m not anti-business, I’m pro business” he reminded the audience at the Toronto talk. “It’s just that if you can’t scale up indefinitely it’s somehow bad or wrong. Ongoing growth should be a happy outcome of business, not a defining element.”

For more, spend some time with Douglas Rushkoff here, at a talk given recently at the 92nd St. Y in NYC.

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