Off Kilter 147: Techno-Feudalism?

Techno Feudalism?

tl;dr: Thought-provoking new work from Varoufakis & Doctorow.

OK. So, before we get into this, I want to issue a caveat. This issue has little explicit connection to branding, marketing, or design. So why am I sharing it? Many years ago, when I studied for my MBA, the most compelling and thought-provoking class I took was in philosophy, which I’d never previously considered relevant to a career in business. Yet I’ve relied more on those philosophy lessons over the past twenty-odd years than any business concept I studied. So, with that in mind, I think it’s worth sharing a perspective that’s, shall we say, a little more epistemological than usual, focused as it is on the end of capitalism and the feudal nature of what some believe has replaced it. Why is this relevant? Well, if true, it will have considerable knock-on effects on everything from consumer behavior to corporate strategy to the very nature of society. Meaning this has the potential to become the overarching context within which every business decision, including brand, marketing, and design, gets made. 

I promise I won’t be this philosophical again in a while. But I sincerely hope you find it as thought-provoking to read as I found it thought-provoking to write.

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I’ve never really understood the term “late-stage capitalism,” no matter how many mouths I’ve heard utter it. Every time someone says it, I find myself missing the next five minutes of what they say because my inner monologue keeps asking questions like: “What does that mean?” “How do we know? “What if capitalism lasts for another two or three hundred years?” And, “Wasn’t this term invented 80-odd years ago already?”

And then I start thinking about civilizations and empires and wondering whether there was a point where the Roman Empire realized it was “late stage” or whether they just kept on blithely keeping on until it all fell apart. Or the Byzantine, the Dutch, or the British Empires. 

And then, exhausted by my inner monologue, I refrain from diving down the Wikipedia rabbit hole to find out and tune back to wherever the conversation has now gone. 

And while I understand that it’s largely rhetorical: An overt statement of fear of environmental destruction, an understanding that finite resources cannot possibly drive infinite growth, and a queasy sense that something seems to be rotten in Denmark, it’s also hard not to notice that those most likely to utter the term “late stage capitalism” tend to have visibly benefited from the system, being comfortable if not outright wealthy.

However, while I’ve never understood the statement in a literal sense, it’s hard not to argue that something doesn’t feel right. Clearly, something really does seem to be rotten in Denmark, or perhaps more specifically, at the heart of our regulatory systems.

For a long time, corporations have understood that the highest ROI of any dollar they spend is on political lobbying. The results are all around us, all the time: the vastness, complexity, and cruelty of the for-profit healthcare system, check. The squalor of for-profit prisons, check. The inevitable multi-billion dollar cost overruns by defense contractors, check. Regulators captured to the point that planes fall out of the sky, check. Productivity improving by thousands of percent while the returns go primarily to the already rich, check. Super expensive broadband without competition, check. And the fact that today the planet is -quite literally- on fire, check.And then there are the small things, like private equity companies vacuuming up entire sectors of the economy, like cheerleading, and then jacking the prices way up because there’s nobody to stop them, check, check, and check again. 

The reasons are simple. If we think of business as a game, then regulations represent the rules by which the game is played. Want to win the game? You have two options. Compete harder, which Peter Thiel famously described as being “for losers,” or encourage the rule-makers to either change the rules in your favor or look the other way when there aren’t any. Of course, given the choice, the answer is as simple as it is obvious; put your energy into capturing the regulatory system for your own gain. 

And that’s what Cory Doctorow has been writing about relative to cars as he reflects on a new book about to be published by Yanis Varoufakis called Techno Feudalism.

The way they see it, capitalism is already dead, replaced by modern-day feudalism. And it’s hard not to see what they’re referring to. 

If the defining factor of capitalism is to make a return by using capital actively - by doing things like investing in factories, building products, and then using tools like branding to compete against others in trying to sell them, then the defining feature of feudalism is to make a return by using capital passively - to hold a monopoly upon which you charge rents like charging people monthly fees for essential features in a car they already own.

In the middle ages, feudal monopolies came in the form of land controlled by kings and the aristocracy, from which rents were extracted from the populace. The authors postulate that digital platforms are the landowners of our modern digital economy, using monopoly powers to extract excess rents rather than compete on a level playing field for our business. 

This is Apple charging 30% for every transaction on its app store, advertisers sucking it up when Google rips them off because they have no other choice, BMW being a bag of dicks and charging a monthly fee for a warm seat, John Deere bricking equipment you thought you owned (but you don’t because you’ve only licensed the software the equipment relies on to function), or your Tesla driving itself out of your driveway and unlocking the doors for the repo-man, and so much more.

Their case is that as layers of software and “digital” are added to everything we buy, corporations are no longer competing to provide value in the capitalist sense but are abusing the legal protections provided to software and internet companies to extract ever greater rents in return for marginal delivery of value.

It’s hard not to see their point. Digital rent-seeking is all around us, it’s impossible to avoid, and it does feel like it’s making a mockery of our stated societal commitment to capitalism. Want to compete against vast unregulated monopolies, aided and abetted by the abuse of DRM laws and Section 230? Good luck because you won’t find a VC on the planet willing to back you. 

And this isn’t just about the biggest digital platforms. Any corporation can now “digitally enable” their products. Connected toothbrush, anyone?

Such seemingly odd decisions -does anyone want a connected toothbrush?- make vastly more sense when we realize that digitally enabling a product changes the very nature of what the product is and, thus, how it can be monetized. Once a product is connected, we no longer own it; we’ve merely rented it. While the hardware might be ours, the software necessary to function has only been licensed. And because the legal protections pertaining to software are so strong, we have little or no agency. Without right to repair laws, we can’t fix it if it breaks. Because DRM laws are so strict, we have no clue what data the product collects and sends home to base. Worse, it’s illegal to investigate and find out, and even if we could, we’d have no say in what the corporation does with that data anyway. And business models can now become overtly extractive rather than value-additive. All those options you specced on your Tesla when you “bought” it new? Well, as soon as you try to sell your car used, Tesla can easily and legally turn them off. Then the person buying the car from you has to rent these features all over again from Tesla, significantly reducing the value of your used vehicle in the process. Heads, tails, it doesn’t matter. Either way, we lose.

And yet, as compelling as this perspective appears to be in describing a good portion of what seems so rotten in Denmark, I’m still finding it hard to wrap my head around it completely. I really like Apple products, and as a consumer, it’s hard to view the company as extractive when I so clearly value what it offers. Equally, I’m an Amazon Prime addict. As with many, it’s my most salient retail brand, with me everywhere I go at any time of the day, night, and early hours of the morning, enabling incredible convenience at -usually- reasonable prices. While I’d never buy one, people seem to love their Teslas. And having worked in the ad-tech space, advertisers seem to like working with Google almost as much as they hate working with Meta. So, is this really a case of extraction without value? 

I genuinely don’t know. But I can see that paying a monthly subscription for a heated seat in my car is just the extractive beginning. The opportunity to make excess, extractive profits in industries that have never had that opportunity before will be too great to pass up. And without stronger regulation designed to protect the consumer rather than the software owner, it’s hard to see the pendulum swinging back anytime soon.

And that should worry all of us. While capitalism has many flaws, it’s proven vastly more beneficial to society than feudalism ever was. Universal schooling is a product of the capitalist-driven industrial revolution, as was mass production, which revolutionized modern society, and child labor laws protecting children from exploitation. China’s shift from collectivism to capitalism raised more people out of poverty faster than any other society in history. And the famed Scandinavian social democracy depends upon robust free-market capitalism to pay for it, managed by a regulatory state focused resolutely on ensuring meaningful competition throughout the economy. 

As an Island Scotsman from the very North of the country, the idea of modern-day feudalism is chilling. The feudal era was not a time of progress but of cruel regression. The history lessons of the Highland clearances and indebted people sold into indentured servitude in the new world are burned into my memory. I’ve walked the hills past the gutted remains of entire communities kicked out because they couldn’t afford to pay rent to the Laird, packed off to the colonies, and then forced to work for decades to pay the debt and earn back fundamental freedoms. And, with the idea of modern feudalism in mind, it’s hard not to view heartbreaking issues like medical bankruptcy as the modern-day equivalent.

So, yeah. It’s hard to see where this ends, but this is one of the most thought-provoking, hard not to nod your head to, and difficult to come to terms with arguments as to how the very economic system we live within has changed that I’ve seen in a very long time.

I hope they’re wrong. And if they aren’t, that our legal institutions and political bodies haven’t been so thoroughly captured as to never do anything about it. But I fear that ship may have sailed, at least for now. 

But, if this all seems a bit depressing, here’s some good news. Scientists believe they’ve successfully synthesized a low-cost room-temperature superconductor. Granted, this sounds like a snoozefest until you realize that if true, it’ll completely revolutionize everything electronic, enable the shift to electrification that a low-carbon economy requires, and make super cool but rare and expensive things like maglev trains entirely economically viable.