---------- Forwarded message ---------- From: <[email protected]> Date: Sun, Mar 6, 2016 at 10:05 AM Subject: Hitting the road To: [email protected] I've been crazy busy with media and writing - all to help birth the new book. Occasionally I look up from the email to look at the TV screen and the way reality TV has taken over politics. As far as I'm concerned, this all started when Dan Quayle took on fictional character Murphy Brown, but that's a lot of history and media analysis to go into at this hour. Suffice to say, the Republican party's subtext has risen, through Trump, to the level of direct assault. This is ultimately the way a digital media environment brings out the truth. I've always thought of digital media like a kind of truth serum. In the long run, it exposes the underlying dynamics of almost any system that touches it. That doesn't mean it makes things better, but it certainly makes them apparent. The digital economy is no exception. We may not like the impact of an Uber or Amazon on the distribution of prosperity - but we can sure see it in action. That's why I wrote my book, and why I think it's hit such a nerve. What would have once been one man's opinion or prognostication is now pretty evident to everyone. I've done a whole lot over the past couple of weeks. No room or need to post it all here, but two of my favorites are the conversation I had at Civic Hall with New America's Director of Technology Projects, George Bullen. The video will be on CSPAN BookTV in the coming weeks, and the audio is here: https://www.newamerica.org/nyc/how-growth-became-the-enemy-of-prosperity/ Among my favorite articles of the past week, here's an piece from Quartz, one from Fast Company, and one by me from The Atlantic. I'll try to write more about what's going on - and on the election - soon. Looking forward to seeing many of you at SXSW next Saturday morning! --Douglas *QUARTZ* *Silicon Valley is broken and heading for social unrest, argues media theorist* by Olivia Goldhill People are angry at Silicon Valley. In recent years, protestors have slashed the tires of buses hired to transport Google employees. They’ve occupied Airbnb’s headquarters and participated in worldwide demonstrations against Uber. These tech titans stand accused of destroying industries and livelihoods, sucking up wealth for themselves while failing to distribute any wider benefits to the rest of us. And they’re guilty, according to media theorist Douglas Rushkoff, author of the forthcoming book *Throwing Rocks at the Google Bus: How Growth became the Enemy of Prosperity*. He argues that unless Silicon Valley’s fundamental model changes, we’re heading for mass social unrest. Rushkoff points out that basic economy theory, as laid out economist and philosopher Adam Smith, recognizes three factors of production: Land, labor, and capital. But in the current digital economy, only capital is valued. “The venture capitalist puts down his money and he’s the only one that gets the return,” says Rushkoff. “The land doesn’t get the return—the neighborhoods affected by Airbnb aren’t getting return on that operation. The Uber drivers don’t get return—they’re unemployed people looking for a gig to try and get by another day.” Today’s start-ups aim for quick and massive growth, so that they can get sold and give original investors a return on their capital. These business practices have been in place since the industrial age. But Rushkoff says they cannot be sustained for much longer. “It doesn’t work as well when we reach the limits of our planet, the limits of people’s time and attention,” says Rushkoff. “The ability of big companies to make money with their money has been steadily declining for 75 years.” Rushkoff argues that several major tech companies operate with intentionally unsustainable business models. Amazon and Uber, he says, work by destroying marketplaces and then using their leverage to move into another area. So while Amazon doesn’t make much money off books, the original industry it disrupted, that’s not a concern for them. They make the bulk of their revenue from other products. “The Uber model doesn’t work as a long-term taxi business—all the drivers would just go broke,” says Rushkoff. “But that’s not the intent. The intent of Uber is to create a monopoly in the taxi business so they can then hop over into something else like logistics or delivery or drones or robotic cars.” Then there are companies like Tumblr, sold to Yahoo for a billion dollars despite the fact that it generated comparatively little revenue. (Yahoo has since admitted that it overpaid for the blogging platform.) “It didn’t actually do anything, so there was no actual business,” says Rushkoff. “What is that—is that a success or a failure? It’s a success for the original investors who got a billion dollars of money.” Google was once an innovative search engine, Rushkoff says. But he argues that since morphing into Alphabet, it’s essentially become a holding company that buys and sells technology companies. He’s also skeptical of Facebook. In order for the tech company to fulfill its growth promises, Rushkoff argues that it will have to generate an enormous amount of ad revenue of the United States. “The thing I wonder about is, if everything we do is supposed to be advertising-based, then who’s left to sell anything?” he tells Quartz. Rushkoff recommends several changes that could save the digital economy. For one thing, he thinks we needs more peer-to-peer platforms such as eBay, Etsy and Kickstarter. Such companies effectively distribute the means of production and allow people to trade with each other. He also argues that tech workers need real living wages, and that they should have at least partial ownership of the companies they work for. And startups need to do more to share the benefits of their success. This would create sustainable prosperity, in which companies grow wealth among their employees and the neighborhoods where they operate–thus allowing more spending and further growth. Rushkoff has a history of making accurate predictions about our digital futures. He wrote on viral media in 1994 and is credited with coining the term “digital natives.” He also wrote a book on the internet in 1992 that was rejected by its original publisher, based on the belief that the online phenomenon would be over by 1993. This time, he says Silicon Valley CEOs and board directors seem to be receptive to alternative ways of doing business, and are looking for ways to become more sustainable. “Over the next ten years, I think we’ll see either a significant movement in that direction, or we’ll be in a bad place,” he says. And what sort of “bad place” might we expect if Silicon Valley fails to change course? “Basically everybody working for 16 to 20 hours a day for very little pay, doing repetitive tasks that for one reason or another, computers can’t do,” Rushkoff says. “And these will be the lucky people, because at least they’re employed.” DOES THIS MAKE MY CUSTOMER RICH? BUSINESS TIPS FOR THE FUTURE STEADY-STATE ECONOMY Originally published at *Fast Company*. <http://www.fastcoexist.com/3057263/does-this-make-my-customers-rich-business-tips-for-the-future-steady-state-economy> by MORGAN CLENDANIEL First God created Heaven and Earth. Then He created The Market. If you prefer your creation myths more scientific, you might say that after the Big Bang, market forces became the natural law of the universe. This, of course, is not true. In America’s plutocratic economy where net worth is held up as the greatest achievement, there isn’t much that we think the market can’t solve. We say the market is setting low wages for workers, that the market enables Amazon and Walmart decimate local businesses, and even that ideas to help the world’s poor should be market-based. Douglas Rushkoff’s new book, *Throwing Rocks at the Google Bus*, reminds us to stop shrugging our shoulders and using the market as an excuse for society’s ills. The market was created—and it can change. “All I ask is that people at the very least acknowledge that the venture capital/startup/financially-driven operating system is a choice, not a preexisting condition of nature,” he says. “The market is a construction. God didn’t make the market.” To forestall an economic collapse that he sees coming if we keep up business as usual, Rushkoff says we need to “develop local, resilient, human-scaled enterprises that work in a variety of economic landscapes.” The book serves as a sort of prescription for how we might do that. From solutions to the mass unemployment being wrought by automation to alternate currencies designed to keep money circulating locally to new ways to generate value for investors without needing an “exit event,” the book offers examples of what a new economy might look like and how you—no matter what industry you’re in—might help move yourself and your company toward it. The underlying theme is a new way of economic thinking that eschews the occasional startup whose value explodes in favor of what Rushkoff calls the steady-state economy. The one edict that should govern all businesses: “Does this make my customers rich? If I’m making other people wealthy, then I am supporting the ecosystem that will keep my business alive.” Right now, our economy is set up to ask the entire opposite question: Does this make our investors rich? Instead of valuing and rewarding the creation of a sustainable economy, we value growth above all other things. Venture capital infuses companies with enough cash that they can expand astronomically and make their founders incredibly wealthy. Look at Twitter, currently besieged by open letters about how to improve its business as its stock tanks. This is the prime example of an economy with the wrong priorities—and the mistakes founders can make by giving into a mindset that growth is the only meaningful goal of business. “Their $500-million a quarter in revenue company is considered a failure by Wall Street. If you make $2 billion a year on 140-character messages, that is such a home run,” he says. Instead, stock holders are demanding more growth, in order to increase the stock price so they can sell; they’re not interested in owning part of a company whose technology has been the underpinning of so much global change, they’re interested in making a profit on the market. Twitter is just one company, but multiply this attitude across the entire economy and things get scary: To continue growing at a rate that will satisfy their investors, companies are forced to find more and more extractive modes of generating revenue. Eventually, with enough companies mindlessly creating new revenue streams to continue to justify their valuations or appease shareholders, they’ll suck consumers of their remaining cash. This extraction is creating a human toll to the damaging economic system: The digital revolution that was supposed to make our lives easier. But as it’s forced to squeeze more and more value from its users, it’s doing the opposite. “This is why you see Bernie Sanders and Donald Trump alike rising. People are doubly disillusioned. Technology is making us work harder and we earn less. It’s not going well. …But then the double anger is that these companies rose on the pretense of being on our side,” says Rushkoff. And to do that requires rejecting the idea that the market is a rule of nature that can’t be changed. CEOs need to find ways to operate their company without acquiescing to shareholder demand for constant growth. You (and Milton Friedman) might argue that that is, in fact, the only thing a company should be doing, but in making that argument, you’re buying into a system that doesn’t need to exist the way it currently: “You can’t ignore the development of the modern marketplace. The market has rules that were written by people, in certain moments in history. … Who made that rule? Why did they make it? Who does it favor and who does it disempower?” The rules, Rushkoff argues, were made not by God, but by aristocrats around the 11th century, intent on preventing the peasants from creating a vibrant economy not controlled by the ruling class. Today, the rules can be whatever we want them to be. Rushkoff doesn’t want a revolution, just a rethinking. “They worked really well for 700 years of colonial expansion,” he says, “but they could use a tweak or two.” Can we actually get there? Will the people made rich by the current economic system listen to his prophecies and realize their success is built on a crumbling foundation and alter their business models—and the very system that made them successful in the first place? Rushkoff says he thinks we can, and that it won’t take economic collapse or violent revolution, but just common sense (he admits, he’s having an optimistic week). He writes in the book that CEOs he talks to are exhausted by being forced into the short term thinking of quarterly growth, and says that as people are reading the book, they’re relieved, because the solutions within give them a path to a better business model: “I’m getting emails from CEOs from Fortune 50-sized companies saying, ‘I can use this, it’s going to work.’ Because these CEOs have been looking for ways to reconfigure to this slow-growth, new normal economy that we’re actually in without getting fired or sued.” So just remember, human beings made this system, and human beings can change it. And one thing we all can agree on is that the system isn’t working: “Big business and small business, extreme libertarians and Bernie Sanders people all are looking toward the same solution. … We’re realizing that we don’t really care about our ideologies as much as about the fact that we’ve let a system get out of control.” THE ATLANTIC: TWITTER IS NOT A FAILURE To listen to Wall Street tell the story, Twitter is an abject failure. The stock is down more than 50 percent since co-founder Jack Dorsey took over as CEO last year. User growth and revenue prospects have stagnated, and investors see little chance of a major turnaround. Yet only in the twisted logic of the startup economy could a company with around $500 million of revenue per quarter—and more, most recently—be called a failure. That’s half a billion dollars for a tiny application that simply lets people send out 140 characters to each other. The economic activity it has generated is nothing short of miraculous. But that’s not enough for investors who expect recoup 100 or even 1,000 times their original investment in the company. To do that, Twitter must grow. Somehow, it must turn itself from a simple, popular, and profitable way for more than 300 million people to broadcast messages into something still bigger—even if it has to risk killing what people love about Twitter in order to do so. This is why I couldn’t help but grimace that morning I saw Twitter’s founders smiling on the floor of the New York Stock Exchange as the company celebrated its IPO and each of them became billionaires. Among them, these guys had upended journalism with Blogger, and credit with Paypal and Square. Here they were throwing in with the biggest industry of them all. When you get to ring the opening bell on the exchange and bask in the applause of the traders on the floor, it’s not because you have “disrupted” something. It’s because you have confirmed that—at least for a few—the game is still working. As the dealer is sure to cry out at the casino for all to hear, “We have a winner!” But becoming such a winner—even playing the startup game to begin with—condemns the founders of a company to chase growth above all else. That’s the core command of the highly accelerated digital economy. This is why a company like Uber can’t simply be satisfied helping people get rides. It must instead establish a monopoly in the taxi business so it can “pivot” to another vertical such as delivery services, logistics, or robotic transportation. Airbnb can’t just help people find places to stay, but must colonize city after city and deregulate its entire sector. A social media platform like Facebook must pivot to become a data miner; a messaging app Snapchat must try to become a news service; even a giant like Google must accept that its once-inspiring stream of innovations pales in comparison to what it can earn as a new holding company, Alphabet. For Twitter, this command means finding a way to grow a business that may already be full-grown. What if half a billion dollars a quarter really is all the world wants to spend on tweets? But that is not an option. Instead, the company must pivot toward new potential growth areas, at the expense of the market it already has. And so Twitter users are confronted with a news reader through which they’re supposed to glean the headlines. Or a new, annoying feature called “Twitter moments”—an algorithmically derived stream of greatest hits, which is little more than a thinly veiled opportunity to fold in “Sponsored Moments,” meaning commercial messages masquerading as organic content. Now the company is working on live-streaming video ads, again valuing growth over user experience. Maybe it’s this very drive toward growth that is pushing users away. For the first time Twitter’s user base has begun to decline, from 307 million users down to 305. It’s just a tick, of course, but in the wrong direction. If Twitter were to value the sustainability of its enterprise over the growth prospects of its shares, it wouldn’t have to invest so much of its revenue in new, outlandish features, and would have a lot more to show in profit. Heck, it might even be able to offer a dividend. Last week, Dorsey told investors on his conference call that he wants Twitter to become “the planet’s largest daily connected audience.” That’s supposed to give them hope for the future. But when the hope of a company is based on it becoming the biggest thing in the whole world, chances are the opportunity for genuine prosperity has already been lost. ---- This is RushkoffList, a monthlyish update and advance look at work in progress. Feel free to forward to your friends as long as you include this footer. 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