The Digital Economy Should Be about Capital Creation, Not Extraction | Big Think

The Digital Economy Should Be about Capital Creation, Not Extraction

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Douglas Rushkoff joins the rank of French economist Thomas Piketty in expressing skepticism about free market capitalism in the digital age. Groundbreaking companies like Google, Amazon, and Uber operate using a "scorched Earth" method of value creation, says Rushkoff, which resembles 13th century colonialism. To make money, they extract value from communities rather than create it, much like conquistadors would extract precious metals from South American nations. If that sounds like a hyperbolic statement to you, you are probably not alone.

But Rushkoff points out that for all our fascination with digital companies, they have yet to make up more than four percent of the real economy, based on gross domestic product. They are not, strictly speaking, very good at creating value. Because they offer services to millions — even billions — of people, it appears they have value, but, Rushkoff asks, what value are those services adding to local communities? Often times, very little. They are, like Walmart, creating a vacuum in which local businesses struggle survive.

It is not that companies like Amazon or Walmart are misanthropic, but that our financial system rewards their method of creating value. Banks grant loans based on a business's ability to extract wealth from a community, not on whether it make positive a positive contribution to a neighborhood. There is another way, says Rushkoff — a way that's good for banks, businesses, and local communities...

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DOUGLAS RUSHKOFF

Douglas Rushkoff is the host of the Team Human podcast and a professor of digital economics at CUNY/Queens. He is also the author of a dozen bestselling books on media, technology, and culture, including, Present Shock, Program or Be Programmed, Media Virus, and Team Human, the last of which is his latest work.

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TRANSCRIPT:

Douglas Rushkoff: For 75 years now corporate profit, over their total value, has been decreasing. That means corporations are really good at accumulating money but increasingly worse at deploying that money, at making money with money. This is really serious. Pharmaceutical companies don't know how to make drugs, they only know how to acquire companies that do. Google even is no longer a technology company; Google became Alphabet. It's a holding company. Google's new business is buying and selling technology companies. They bought a robot company, now they sold the robot company. So they might as well be Goldman Sachs or Merrill Lynch or somebody. They are a meta company now because they don't know how to create value.

That's because they're using a bankrupt method. They're using a 13th century corporate operating system to run digitally enabled businesses. What I'm arguing is that 13th century model is obsolete. It was based on going to South America and enslaving people and taking their precious metals. It doesn't work for a digital economy. It doesn't work for an economy where people are buying and selling and trading and making videos and exchanging value. And if you want to do well, if you want to actually make money you have a better shot of it by creating circulating value. Think eBay not Amazon. Think Bitcoin not Uber and you're slightly on the path. It's a peer to peer networked economy that we're moving into. If you can conceive of that, if you can get yourself out of the frame of mind where you want to get the ring the bell on the NASDAQ stock exchange, you're not going to get to do that. I promise you. You're not. That's not the way to go. You don't want to sell your business; you want to run your business and make money doing your business. And you have such a better chance of becoming a true millionaire and doing it in a way that's not taking value from other people but is actually promoting business activity on a wider scale and on a more distributed scale than was possible back in the Middle Ages.

Right now most CEOs are selling off their best businesses, they're cannibalizing their most productive enterprises in order to show short term growth to shareholders. That's actually bad for the long term success of the business because without successful revenue generating industries it's hard for the business to keep going. They actually need revenue. You need to be selling something. You need to make money in an ongoing way.

I know that's heresy. I know. I get ....

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