Do Tech Companies Skew Markets?

The Economist’s Nicholas Barrett interviewed Douglas Rushkoff about a practice he calls extractive capitalism: though digital tools are inherently flat and collaborative, tech companies driven by VC or equity valuation suck up all the data on which these networks are based, turning users into a resource to be exploited.

He’s right (give the too-brief podcast clip a listen here), though I think there’s a communications element to it.

Capitalism requires markets in which to function, whether specifically defined like trading floors for stocks, or generally speaking, like the public square in which people interact in any commercial manner. The fundamental premise of every market is that participants have equal access to information, so that they can collectively assess, vet, and apply themselves to making the best decisions that benefit not just themselves, but the greater good.

Adam Smith’s idea was that you acquire capital by surviving this gauntlet of truth and accountability.

As such, markets are always imperfect. There wasn’t enough info available about tulips, South China Sea stocks, or CDOs, and probably too much hype for companies like Enron, AOL Time Warner, and Snap. It took 200 years for science and society to figure out that the pollution the Industrial Revolution dumped on the Earth had consequences worth measuring.

That’s why there are rules and regulations to ensure that they operate as efficiently as possible, and mechanisms for noting and resolving instances when they don’t. Unlike socialism or any other command-and-control approach to commerce, the point of rules in a free marketplace isn’t to dictate what, who, when, or even why things are bought and sold, but simply ensure that the how applies equally to all.

Tech companies don’t skew these conditions, they obliterate them outright.

Few “purchasers” of services from companies like Facebook or Google have the slightest idea what they’re being “sold.” Consumers give up data on their interests and locations, which are then monetized to sell them stuff. Information is curated by commercial interests, though it is presented to them as if it’s objective reality. Chat changes social structures as much as digital commerce upends economics.

But consumers aren’t the point of these services, according to Rushkoff, since the tech companies are beholden to their investors. So, while there are rigorous disclosure and ongoing reporting requirements for getting a company’s stock listed (as well as agreed-upon metrics), and VCs demand significant details and commitments guaranteed by law, consumers get told practically nothing.

Oh yeah, marketers tell them the benefits are “free.”

The rules that inform our markets have not yet evolved to accommodate this reality; markets are more like the data lakes we hear so much about, from which tech companies fish for the capital that Ruskoff references.

Sharing Economy platforms like Lyft and Airbnb are somewhat more true to the function of a free market — they give people a transparent mechanism for transportation or housing transactions — but the tech interface still masks (or ignores) so much of the information relevant to those deals, like safety, accountability, and jobs.

Arguably, nobody really knows the true costs that we’ll incur to enjoy the benefits of digital transformation, and they may well be more than reasonable.

That’s why we need capitalism to work, and that means making marketplaces truly free and transparent for all. Right now, they’re anything but.