Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity (13 page)

Amazon obsolesces the peer-to-peer marketplace through its very centrality. At first, services such as Amazon Associates and Fulfillment by Amazon appeared to be a boon for peer-to-peer activity, giving anyone the ability to post listings and sell new or used books or other merchandise to anyone else. By posting used-book offerings in the very same display as a new-book listing, Amazon undercut its own book sales as well as those of its original vendors—the authors and publishers who are now dependent and powerless. This doesn’t matter to Amazon, though, because the books are just a loss leader for this bigger prize: ownership of the marketplace itself.

People selling to one another on the Amazon platform are not in a true peer-to-peer marketplace. They are not connecting directly; they are each connecting to and through the product listings on a centralized server. The ability of the net to make true point-to-point connections is not being enhanced; instead, both parties are simply interacting with a Web site that cares about nothing more than extracting a percentage of the transaction and becoming the only venue where such transactions can happen.

Amazon retrieves the spirit of empire by colonizing not just verticals within its own category but horizontals in everyone else’s. It first established a platform monopoly in books by selling books
at a loss
, in the
manner of Walmart using its ample war chest of capital to undercut local stores. A simple loyalty perk like free shipping was eventually revealed to be the ever-expanding, increasingly sticky Amazon Prime. Amazon then leveraged its monopoly in books and free shipping to develop monopolies in other verticals, beginning with home electronics (bankrupting Circuit City and Best Buy), and then every other link in the physical and virtual fulfillment chain, from shoes and food to music and videos.

Finally, Amazon flips into personhood by reversing the traditional relationship between people and machines. Amazon’s patented recommendation engines attempt to drive our human selection process. Amazon Mechanical Turks gave computers the ability to mete out repetitive tasks to legions of human drones. The computers did the thinking and choosing; the people pointed and clicked as they were instructed or induced to do.

Neither Amazon nor its founder, Jeff Bezos, is slipping to new lows here. The company is simply operating true to the core program of corporatism, expressed through new digital means. Amazingly, as of this writing, anyway, Amazon itself operates at a loss. Its share price is the only thing that’s going up, currently sustaining a market cap of over $150 billion.
30
But in a deeper sense, this means the corporate program is working perfectly: all the value is being accumulated in the investors’ shares, which are still going up.

Amazon isn’t really a new sort of company so much as a very old sort of company. It is leveraging digital platforms the way colonial powers once leveraged their exclusive shipping routes to the New World. (Both even have pirates to watch out for!) That’s why none of this is ever about bringing more value to people or—heaven forbid—helping people create and exchange value on their own. Digitizing the corporation simply affords it ever more efficient and compelling ways to extract what remaining value people and places have to offer.

This is why we shouldn’t be so surprised that most of the strides in artificial intelligence have a whole lot more to do with computing power than with human potential. Projects such as IBM’s Watson or Google’s Machine Learning lab are not augmenting human intelligence so much as
creating systems that think for themselves. With every keystroke and mouse click we make, their algorithms learn more about us while simultaneously becoming more complex than we—or anyone—can comprehend. They are getting smarter while we humans are getting relatively, or perhaps absolutely, dumber.

Our machines slowly learn how to manipulate us. It’s a field now called captology: the study of how computers and interfaces can influence human behavior. At Stanford, where it is taught in the computer science department, captology is pitched as a way of helping people live happier, healthier lives. The examples of captology at work on its Web site include rewarding people with pleasing graphics and sounds when they balance their checkbooks online or reach a target weight as measured by a digital scale. But the real market for thinking technologies is corporations looking for ever more powerful ways to compel humans to act.

Imagine a world where online purchases are stoked by photos, colors, and appeals assembled by algorithm and fine-tuned to our individual profiles. Or apps that make sad gong sounds or display little frowns when you decide to turn them off. Well, they’re already here. As our machines become more intelligent, they will become better actors, tugging at our heartstrings in all the right ways. This is not because they’re alive or have feelings but because they’ve succeeded in carrying out their original corporate programs.

Many computer scientists and technology philosophers look forward to the day when our computers surpass human intelligence—what they call the “singularity.” They hope that computers will simultaneously achieve a form of consciousness as well and carry the human project into the future even after we’re all gone. That would definitely count as the ultimate flip of corporations into personhood. Sure, a few favorable Supreme Court rulings have helped, but the best enabler of corporate evolution toward personhood is this newfound digital ability corporations have to think for themselves. As the corporate program fully integrates with digital technology, it’s no wonder our biggest corporate conglomerates make artificial intelligence their highest priority.

Although computers may never become conscious, they will certainly be smart, and their ability to iterate rapidly will prove challenging for human beings on both sides of the corporate equation. At that point, who is left to exercise any human intervention in business? The people running corporations can no longer credibly claim that they are merely responding to consumer demand, since consumer demand will be largely determined by smart machines. And those machines will simply be running the original and unchallenged corporate program as best they can, carrying out a thirteenth-century template for converting value into capital, replacing human agency with the corporate agenda, and usurping organic growth by creators in favor of monopolized extraction by established players.

Most significantly, they will do it faster and better every day, learning and improving with every action. The programs with which we carry out our daily business, from online shopping to employment platforms, are all optimized to accelerate. This is why these business plans are spinning out of control, toward the extremes we’re now witnessing. We took a program that used to require human actors to execute and put it on a digital platform.

Ironically but irrefutably,
this is not good for business
. As more value is sucked out of the economy and frozen in corporate storage, companies’ return on assets erodes even further. As corporate algorithms battle one another for platform monopolies, the extraction of value and opportunity from the real economy worsens. An app swallows an industry and has nothing to show for it but shares of stock with no earnings. On a digital landscape running only corporate code, corporations themselves end up in the same predicament as musicians and everyone else: a couple of winners take it all while everyone else gets nothing. Making matters worse, remember, in a successful corporate environment total economic activity
decreases
as money is sucked up into share value.

It’s as if the business world is morphing into a video game. We can only wonder who the eventual winner of the growth game will be as the Gini number creeps upward toward one. Sergey Brin, Mark Zuckerberg,
Jeff Bezos . . . ? They’re playing in a winner-takes-all competition. Google is trying to leverage its platform monopoly to become a shopping platform, Facebook is leveraging its monopoly in social media to become an advertising service, and Amazon is leveraging its store to become a cloud service.

In the corporate program, there’s only room for one.

CEOs are coming to recognize digital industrialism’s diminishing returns. Some are scrambling to extract what remaining value they can before the inevitable crash. Others, however, are coming to realize that companies in a digital landscape don’t have to approach their markets with scorched-earth determination or with the biases of traditional corporatism operating as their core code. They don’t have to grow in order to stay alive, or achieve absolute monopolies in order to achieve their goals. Digital companies in particular have the ability to rethink some of these assumptions and rapidly deploy new approaches.

For example, as an alternative to investing in the platform monopolies favored by most of today’s venture capitalists, Fred Wilson has invested in Uber competitor Sidecar, which he argues “has built a true open marketplace for ridesharing.”
31
Sidecar does not offer the extreme convenience of Uber, but it’s not really geared toward increasing the efficiency of business travelers. It’s more of a peer-to-peer ridesharing app, through which passengers book lifts from drivers usually in advance. The app lets passengers connect with drivers and then gets out of the way, emphasizing those human-to-human connections over the primacy of its own platform. In contrast to Uber’s centralized price-fixing and opportunistic gouging,
32
Sidecar asks drivers to set their own prices by negotiating with riders within the application. Sidecar facilitates a decentralized free market.

The app has been configured to transcend the traditional biases of the corporation against real-world human connection. It’s a more social rideshare program, not a gray-area, unregulated taxi service, so it’s not
competing head-to-head against full-time livery drivers. Uber surely wins in an always-on world where agility is the key to success. Sidecar wins in a slightly slower world where riders plan ahead, giving them the added luxury of being choosier about price, driver, and amenities. Think Grandma’s weekly drive to the hairdresser or grocery store. She might even find a driver she likes and book him regularly. The fabric of local connections begins to assert itself. For their part, the part-time drivers are less reliant on the platform for income and thus less likely to accept a pittance for their services.

In some sense, these apps are each configured to their respective visions of the world. Uber’s is a corporate-driven world where speed and convenience trump socializing and planning. It exploits a platform monopoly to extract value from its users, while Sidecar attempts to help its users create and exchange value in a new way. Uber’s reviews and other capabilities are worth more to us in an anonymous landscape, where we are depending on this information to judge one another. Sidecar depends more on its users’ finding favorite drivers, engaging in repeat business, and setting up regular schedules.

At the very least, apps consciously engineered to promote the net’s connective potential may just disrupt the disrupters. As Wilson explains, “We think it’s more likely that [a] true peer marketplace will keep Uber honest than the legacy fleets of limos and taxis that are fighting for their life against Uber right now.”
33
For now, these peer-to-peer alternatives are limited to local scenarios like finding a lift to work or a babysitter for one’s kids. Those are places where the regional and human elements still offer a competitive advantage.

In the venture capital game, however, Uber clearly wins. Sidecar has taken in about $20 million, while Uber is worth closer to $20 billion. The bigger, centralized solutions offered by corporations with traditional, extractive, and monopolistic strategies are more attractive to investors, who are themselves betting on winner-takes-all outcomes.

But companies that can reach profitability through real-world
revenues and then pay back those dividends to employees and other stakeholders may actually be in a much more defensible position moving forward. For them, growth is not a requirement but a happy side effect of doing good business. Becoming bigger could make the businesses’ owners a bit wealthier, but for the most part it just means more individuals will be able to participate in value creation. The winnings are not accumulated in stock. They are distributed in salaries, dividends, and services.

The next wave of digital businesses may just look more like Sidecar than Uber. Given the limits of the marketplace to provide more capital to the investor class, it may
have
to. Instead of striving for platform monopolies that mirror the monopoly charters of the earliest corporations, these more distributively conceived digital companies are looking to the peer-to-peer architecture of digital networks for inspiration. They end up with models less dependent on establishing and enforcing monopolies and less encumbered by the growth imperative. In almost every sector, from health to clothing to 3-D printing, distributive alternatives are challenging the platform monopolies.

Take education. The leading digital platform for college class management is called Blackboard. With over 17,000 schools under contract, it is on its way to platform monopoly in this sector and is already worth a couple of billion dollars in private equity.
34

The Blackboard system runs as a big, centralized server that controls who has access to what. It is a one-stop shop for everything associated with teaching and learning, from group e-mails to video assignments to grading. Everything happens through the platform, which gives Blackboard the ability to take control of more and more classroom assets as it is used. For example, it’s easy to e-mail a student or an entire class through Blackboard but impossible to find a student’s e-mail address in order to communicate through any other means. The more education and administration Blackboard subsumes, the more dependent everyone becomes on it, the less reversible the decision to use it, and the more easily the company can leverage its control to upsell something else. Mention the
name Blackboard to an educator, and you’ll get an instant tirade on the pitfalls of centralized platforms. In the true spirit of a platform monopoly, the company attempted to patent the entire concept of connecting Web-based tools to create an interconnected, universitywide course management system
35
and sued its lone competitor for infringement.

In stark contrast to Blackboard’s winner-takes-all colonization of the education space, a Knight Foundation–funded startup called Known
36
attempts to fulfill the same classroom functions without any centralization at all. It models itself after what has become known as the “open Web”—a series of protocols through which people, Web sites, and applications can interact directly. Back before Facebook, for example, people managed their own Web sites on separate servers. Facebook brings all those Web pages together into one place, but users must surrender authority over their information, ownership of their data, and even the ability to reach everyone in their own network of friends (unless they pay a premium to do so). Open Web advocates seek to create services and applications that restore the peer-to-peer quality of individual Web sites. They make their own platforms as “thin” as possible, so that users can keep their own data and feed one another stuff. Think of it as a bit more like a newsfeed or e-mail than Facebook or a newspaper Web site. When there’s no central repository, there’s much less of a drive toward platform monopoly or the creation of absolute dependence on a single entity.

The Known project is really just a set of open-source components through which teachers and students can subscribe and publish to one another’s Web pages. Teachers can make pages for their classes, then provide access to enrolled students. Those students subscribe to the Web pages of classes in which they are enrolled and receive the appropriate feeds on their own Web pages. Known provides server space for those who want or need it, but it’s not at all mandatory. The real product here is not a platform but a set of protocols through which all these little independent Web pages can feed information—assignments, papers, and so on—to one another. Jane writes a paper, publishes it on her private page, and then
“syndicates” it to her teacher or her whole class, depending on what she wants. Those people then see the paper on their own Web pages.

While Known can charge for server space or a fully supported version of its tools, its whole system is open source and running on open application programming interfaces, or APIs, which let anyone incorporate the apps into their own systems. The company makes money by charging for what it provides to its users, not by selling shares to speculators. As what amounts to a service company, Known will make profits that are proportionate to how many people it is serving, but it will never be able to justify the valuations of a closed platform like Blackboard. Then again, as long as companies like Known don’t accept too much venture capital, they will never have to justify those sorts of valuations.

The truly successful scalable company in the digital economy may not be the one that can grow infinitely but the one that can prosper on any scale, large or small. Learning to scale down as well as up may just be the key to longevity in a moment like this, when the original corporate game plan for perpetual growth appears to have reached its limits. That’s a lot easier for a new digital company to do from scratch than it is for a major corporation to pivot toward after a hundred years of pursuing growth.

It’s time for the Fortune 500 company to act like a river reed instead of a mighty oak. But how?