08.04.09
By Julie Lasky | Dialogues

Kurt Andersen and Douglas Rushkoff: Part II




Julie Lasky

Examples of off-the-grid entrepreneurship like Doug’s neighborhood restaurateur [who raised capital to expand his business by borrowing from his patrons, offering a 20 percent return, payable in meals] are encouraging, but what are the financial realities of such businesses? Wouldn’t the restaurateur have to remain open for decades to feed the promised interest rate to his investors? Doug, your book applauds the environmentalist Majora Carter for cleaning up the South Bronx with the help of community members trained in green-collar jobs, but who’s paying for it? These alternative enterprises still depend on subsidies, yet in your book you seem vigilant about the taint of any centralized, corporate influence, and one never has to look very far to find that. Speaking of Jon Stewart and Stephen Colbert, for instance, you write, “No matter how critical of corporatism some entertainers and journalists might be, the impact of their arguments is undercut by their dependence on corporatized media for dissemination.” How pure ought we to be?

Douglas Rushkoff
Lots of good questions in there. Maybe I should try to wrap them into a single line of inquiry.

Most simply, the financial realities of Comfort, the restaurant, have turned out to work really well. Luckily, expansion of a restaurant doesn't require millions of dollars. He needed about $40,000. And it appears that one or two tables per night at the restaurant are being paid for with previously purchased credits. This is turning out to be a very sustainable rate of payback for the restaurant. The debt will probably be used up in the first 18 months. (I may not have explained the actual system clearly. People don't invest and get back money. People buy meals in advance at the restaurant, and receive 20 percent more value off the menu than if they just walked in with cash. A Comfort Dollar is just $1.20 to spend at the restaurant. He used the upfront investment to pay for his expansion.)

In fact, the whole system ends up being a promotional opportunity, as people who are anxious to use their restaurant cash (lacking funds these days, as many of us are) bring friends. Those new people get exposed to the restaurant, and come back, bringing more new business. The newly expanded restaurant is filled — with largely new clientele — and hasn't spent any money on ads.

As for Majora Carter, I don't blame her for taking seed money from non-profits any more than I blame myself for taking an advance from Random House. It's not a sustainable model, but it can certainly push things along — particularly if we don't have to pay it back. I did ask her successor about this on my radio show, though, and she seemed to feel that these neighborhoods had been drained and polluted by the very corporations from whom Sustainable South Bronx was now soliciting grant money — and that some payback was deserved.

The object of the game is not to eliminate all centralized capital, but rather to see its limits. When we come to grips with the fact that Gates Foundation invests billions in the companies working against the foundation’s actual goals, we are in a position to at least compare the impact of spending and holding money. When a contract with Random House actually costs me more readers than it gets me, I have to evaluate what I'm doing. Why did I take the contract instead of self-publishing? I needed the money to spend the time to write the book. Was it ideal? No. But the other reason was that I knew I wouldn't stand a chance of getting reviewed in The New York Times if I didn't have a corporate imprimatur they recognized on the spine. I wanted to enter into a particular conversation that, right now, is dominated by more branded labels.

At a certain point — and only John Stewart or Colbert know if they're yet at this level — an entertainer or writer or cultural philosopher could become big enough on his or her own to deliver messaging effectively and directly. It's hard to argue for the elimination of unnecessary intermediaries when I'm asking people to spend Fed-issued money at Barnes and Noble for a book published by Bertelsmann. In one sense, these corporations are helping us transact more efficiently; in another, they are simply extracting value without contributing. They've built a system in which they are necessary.

I don't think we have to be pure; I think we have to be conscious of both means and ends. And I don't think we have to eliminate all top-down efforts at creating growth and opportunity — we simply have to understand the biases of certain activities.

The gift economy of the Internet heartens me, too. It demonstrates that people can go about things another way — if they forget about deriving immediate cash back from their activities for long enough to try.

And it will be interesting to watch the economy recover once people start doing favors for each other. Every time an old lady teaches someone how to breastfeed, another lactation consultancy loses revenue, some company's debt structure is violated and the GNP is sacrificed.

If a majority of people in Americans even just took a real Sabbath — a single day off every week from consuming or producing — it would have a devastating impact on economic growth as currently required by our debt-driven economy.

While I am rather confident of people's ability to find one another and weather such a storm, I am less confident of our banks' and indebted Fortune 500's ability to fare as well without more debilitating bailouts from future taxpayers.

It feels to me like the ability to create value in a decentralized fashion — an ability granted us in large part by the internet — fundamentally changes the rules of the game. This, combined with "developing"-world pushback against further expansion by the World Bank and IMF, prevents our economy from continuing expanding. And, as you know, our economy was not developed with sustainability in mind, only continued growth.

So I just don't see it as a workable model. It could possibly be resurrected for another "round," but its fundamental premises only really worked for the colonial era, where value could be extracted rather than created.

Lasky
Oh, $40K. I assumed more was at stake and pictured scores of townsfolk chained to tables, dutifully redeeming their investment. ("Meatloaf again?!")

Kurt, you acknowledge in Reset that while the economic meltdown is giving some people a chance to acquire new skills and more emotionally rewarding jobs, a greater number has been devastated by the crisis. Do you find that people who are successfully reinventing themselves, or finding deep compensations, depend solely on their own initiative, or can you recommend any resources that might help others do the same?

Kurt Andersen
First, as a sidebar comment, let me say: just had dinner with my freshly college-graduated nephew, and when I excused myself to go do this, he excitedly said, "The Doug Rushkoff? You're talking about Life Inc.?!?"

How I hate being the designated Dr. Pangloss and/or apologist for the Man, but here I go. Saying that you, Doug, doubt the "indebted Fortune 500's ability to fare as well without more debilitating bailouts from future taxpayers" seems to me like a rather gigantic exaggeration. Yes, some banks and two of the three car companies have gotten federal bailouts, but widespread failures of lots of other Fortune 500 companies? I'll take that bet. Nor can I imagine any political consensus to bail them out if that were to happen. And while it may be plausible that the growth rate of the U.S. economy will permanently decline, I'm afraid I don't get how developing countries' pushback against the World Bank and the IMF will be a primary fetter on U.S. growth. Moreover, I don't understand why moderate growth — as opposed to the bubbly, purely financial pseudo-growth that obtained during the last decade — is unsustainable. Moreover, as wasteful as America's cyclical booms and busts may be, economic growth since the colonial era has been both incredibly robust and (mainly) real. Why do you consider most of the economic value created in the last 225 years somehow unreal?

And how does Stephen Colbert's and Jon Stewart's "dependence on corporatized media for dissemination" actually undercut "the impact of their arguments" that are "critical of corporatism"? It's a great irony, for sure, and Viacom and GE aren't likely to broadcast revolutionary incitement (as opposed to slightly subversive leftish comedy), but the actual impact of the truths told by Colbert and Stewart is certainly greater than those disseminated by, say, The Nation and Mother Jones. Just as the impact of your Bertelsmann-published book is greater than a self-published or university press critique would be. I understand that you see this as a somewhat sad, recursive, Matrix-like state of affairs, something like what Herbert Marcuse called repressive tolerance; I see it as a sign of late capitalism's ability to accommodate a vigorous discourse. I guess the bottom line is you're a utopian, and I'm not.

In answer to your question, Julie: yes, I have spoken to a bunch of newly out-of-work people who are successfully reinventing themselves. Of course, it would be a lot easier for a lot more Americans to do that if and when we establish a sensible universal health care system, and create more communities where car ownership isn't an economic or social necessity. As for deep compensations, I can reliably speak only to my own family's — and indeed, significantly reducing our household "burn rate" during the last year has made us more content.

Rushkoff
Ha! I'm so glad to be a "the" Doug Rushkoff, especially with the next generation. You're looking at my long tail possibilities right there....

I don't relish being the attacker of the Man, necessarily, but I can muster some disagreement to what you're saying. I don't consider our growth over the last 400 years unreal. I just see it as dependent on vast new territories and resources. Corporatism and central banking gave former feudal lords and other static aristocracy the ability to invest and lend instead of creating value. The problem was that most working companies required neither.

Early corporations only accepted the King's charters because they came with monopoly control over a sector. Companies didn't need the investment capital so much as the absolute authority over a sector or region. A charter didn't mean anything without that. After all, they were giving up 10 or 20 percent of the shares in their companies to passive investors. And the kings weren't picking fledgling companies in which to invest. They were picking the biggest and best.

So the real trade was exclusive control of a region or industry (as well as military authority over that region). In exchange, the king won the right to invest. As a result, the bias of business changed from creating value to extracting value. Monopolies gave companies a way to prevent anyone but them from making money. When West Indies peoples started to make and sell rope to the Dutch East India Company, the company went back to the king and got a law making it illegal for anyone in the West Indies to make rope — other than the Company. So all the rope makers now had to become employees of the Company.

This dovetailed perfectly with a debt-driven economy, in which growth was now a requirement of debt rather than a product of value creation. And growth was easy as long as they had new territories. First, they were conquered quite directly (conquistadors, colonists, and the like) and then more indirectly, through post–Bretton Woods IMF and World Bank policies. Now we can debate what was good and not, and whether civilizing post-colonial territories is a good thing or bad thing (after being devastated by a few centuries of traditional colonialism, most of these places were not in a position to develop economies on their own, anyway). But the fact remains that western corporate economic growth depended on the World Bank lending money to developing regions in return for them opening their markets to corporate development.

The landscape is littered with the plants of major western corporations that have used the privilege of newly opened markets to pollute groundwater, end subsistence farming, force dependence on company jobs and — in the process — create the illusion of growth in those regions (even cancer treatments make the GNP go up) and, more importantly, create real financial growth for the companies doing business there.

Obama himself has admitted on numerous occasions that this won't work any longer — that the rest of the world wants to create and retain value for itself, and that the United States will have to abandon its model of value extraction and learn to "do real things."

As for the debt structures of the Fortune 500 — I'm not saying they will fail if we don't bail them out. I'm saying their current success and stature isn’t based on their ability to create value. It is at least as much a product of entrenched regulation that favors their existence over businesses that would produce more value, more efficiently, for more people. But if we are talking bailouts, the bailout of Citibank or Bank of America is a bailout for the kinds of companies they support. Pandit, CEO of Citibank, just said that Citibank's "core competence" is "opening global markets to American companies." That's not about you or me borrowing money to buy a few computers and start the next Inside.com.

The bailout of AIG was really just in order for the insurance company to pay off Goldman Sachs for the huge bets it made against the mortgage-backed securities it was selling to state pension funds. They took our money, and then we spent tax money to pay them off for winning the bet about how well they would screw us. That's redistribution of wealth when they win, and more redistribution of wealth when we lose.

And neither am I utopian. Most of my work is anti-utopian at the core. It's the ends-justifies-the-means construct of utopianism that puts me at odds with so many of the folks who would otherwise be my allies in the complementary currency / community-supported agriculture / let's build things from the bottom-up community.

I'm really much more aligned with what you're saying in Reset — only I do see it as a potentially bigger turn than just a couple of decades. I think the right/left divide no longer describes the back-and-forth we're undergoing, and that a more fundamental shift from value extraction to value creation may be taking place.

As for the bet, I'm actually willing to make one. These companies — many of them — are going down. Their growth has been largely artificial, and if they adopt sustainable business models their shares will plummet. Nobody wants a sustainable business. Not if they've borrowed money or sold shares.

But if I win, I'm not sure what I'd get. Hyperinflated dollars? Shares in GM? The "new" GM? Gold? Pork? Shares in a CSA? Or, in gift economy terms, how about an interview on your radio show?

Andersen
Very glad to know you're not an ends-justify-the-means utopian. And as for settling our bet post-apocalypse, how about we agree to grant each other asylum in our respective New York City and upstate fortresses to escape the impoverished and ravening zombie hordes?

But seriously: you really think that credit and investment per se (as opposed to overleverage and excessive speculative investment) have created more human misery than human happiness? Because I don't.

Rushkoff
I think the credit and investment economy created more misery for the people who were overrun, less misery for the overrunners. I don't think the colonists got to participate fully in the wealth they created for the chartered corporations they worked under, but they certainly got a better deal than the indigenous populations they decimated.

That aside, though, and accepting for the sake of argument that economic expansion and colonial expansion are unrelated, I think that the credit-based economy may have created more human happiness than misery. But I believe that the credit-based economy was supported by a geopolitical passivity and biospheric abundance that no longer exists today.

So innovation in "financial instruments" replaces what we might call "real" innovation, and over-leverage becomes the only way to keep the game going. I don't think there's enough real economic activity to keep all speculators (meaning all of us wannabe retirees with 401k plans) in business. There's not enough wealth being created unless we have a way of leveraging a single pound of grain into a house with a yard.

I don't mean that in the evil sense, but the practical one. We can pretty adequately address all human need with significantly fewer people working than we might imagine. Two days a week, globally, would be more than enough labor. But we don't have an economic model that supports the possibility for abundance. We could not currently cope with, say, an abundant free energy supply, just as we couldn't cope with the tremendously unleveraged wealth potential for the internet. It's the decentralized value creation offered by the net that broke the hold of central capital on the economy in the first place. At least, most recently.

Andersen
I tend to agree with you that large swaths of the world are looking a gift horse in the mouth. That is, atavistic fear of scarcity leads us to gluttony, because "we don't have an economic model" — or social or cultural or psychological models — "that supports the possibility for abundance" and makes it easy, e.g., to reorganize our lives around "an abundant free energy supply." Although given that the length of the average work week has dropped by 50 percent during the last century and a half and the length of the average American retirement has increased by 150 percent during just the last half-century, it seems plausible to imagine that we could adapt. But in any case this is, as my father would've said, a high-class problem. And I find it hard to imagine that without the centuries of economic growth and scale enabled by credit and investment that we would be having this discussion — that is, debating whether or not we can learn to accept our abundance and chill.

Rushkoff
Accept our abundance and chill....or what? I think that's the bigger question. It's not that we accept our abundance and chill, or simply worry more than we have to about our retirement accounts.

I don't think I'm being apocalyptic when I say the stakes are higher than our stress level. If we don't learn to accept our abundance — or, more to the point, re-introduce some abundance-based currency and business models into a landscape characterized by scarcity — we end up incapable of addressing the underlying causes for all sorts of bad stuff that's going on. Oil wars, environmental damage, overuse of chemicals and pesticides, destruction of the ecology (let's not forget about those dying bats) and so on.

Add to that an economic crisis that I don't believe is a passing phase but an opportunity — dare I say, demand — for the implementation of some new models.

And these models have to be adopted against the headwind of a corporate culture and administration attempting to refund business as usual.

Robert Reich finally went on record at TalkingPoints with his prediction of no recovery, but a rather complete remaking of the economy:

"The global economy is contracting.

"My prediction, then? Not a V, not a U. But an X. This economy can't get back on track because the track we were on for years — featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere — simply cannot be sustained.

"The X marks a brand new track — a new economy. What will it look like? Nobody knows. All we know is the current economy can't "recover" because it can't go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin."

It's this contraction that may not be an undulation, but a new state: 400 years of expansion (with a few bear markets and contractions along the way), which corresponded with the expansion of western business and military powers across the globe, in a particularly "yang" fashion. Now that we're butting up against the limits of that expansion, we adopt a new model for a sustainable economy. Or, I believe, else.

Lasky
Both of you extol the internet—Doug, as a means of bypassing the stranglehold of corporate control to create value, and Kurt, as a playing field for amateurs, in the nice, old-fashioned meaning of the term: people who engage in activities out of passionate interest. Extracting wealth from the web, of course, is a different matter, and all that amateurism is making life difficult at the moment for, say, working journalists, who can’t compete with people writing for peanuts or less. Is there a model in your minds for how the media business will ideally work, or a current exemplar? Or, if you’re tired of that question, do you have ideas for how we might leverage the internet’s potential wealth in general?

Andersen
Taking the long view inevitably tends to sound callous, and when I describe my hopeful long view of media evolution — that we are in a transitional moment of extreme creative destruction, but that new, high-quality, economically sustainable news enterprises will emerge from the rubble — I don't mean to ignore the present-moment pain and disappointment of thousands of newspaper and magazine workers. I don't know what will emerge as the most common revenue mix, but more subscription-supported media at the high end and more advertising-supported media on the local level seems likely to me. And as many observers have noted, even as the big media story of the last 25 years has been its fragmentation into smaller and smaller audiences, public radio has grown and grown and become more and more excellent — and done so by giving content away for free while also forging a voluntary subscription model that works well, supplemented by revenue from a limited amount of advertising that they don't call advertising; very small amounts of government support; and philanthropic subsidies. This looks to me like a — if not the — wave of the future.

Rushkoff
I agree.

Advertising-based mass media was great when the object of media was to promote national brands to everybody at once, and to replace local commercial relationships with long-distance brand relationships. (Joe the oat miller becomes the Quaker on the box.)

Now, I agree that ad-based media will probably still work on a local (or micro-community) level, while pay-media will work for larger audiences. So far, anyway, people are willing to pay for their HBO series — and seem to be happier with the results.

The sad fact of the matter for those of us in journalism is that there really are too many of us. In most cases, the redundancy isn't contributive. I mean, how many news vans need to circle Michael Jackson's house when he dies? (Or, worse, Britney's when she goes nuts.) People who want to write are going to have to accept the fact that not everyone had to be on Huffington Post to make a living or to find great satisfaction.

I do agree that the internet is what has allowed for decentralized value creation — sometimes by people who don't even ask for money in return. I mean, take a look at YouTube. People are buying equipment and paying to upload movies they make instead of paying to watch movies made by some corporate film studio. Production is a new form of consumption.

And it's tricky, in such an environment, to ask to be paid for what everyone wants to do for free (or less than free).

The more sophisticated we get, however, the more we'll be able to distinguish between great journalists and passionate citizens (both of whom have a place in journalism). I remember designers were upset when Photoshop came out — they thought that their skills had been made obsolete. And of course it only took a year or so before we all were able to distinguish a skilled designer's work.

But it does bring me to the bigger question that plagues a lot of us "knowledge workers" these days, and that is: what value do we actually create? I don't personally get into Neil Strauss's whole survivalist mentality, but it is interesting to consider what we would offer a society that required people to contribute real, tangible things? If there were a truly devastating economic crash (not saying there will be, but it's always possible) and local economies were actually forced to fend for themselves in a genuinely bottom-up way, just how many game designers and journalists and personal coaches would our economies support? And I compare this with just a few generations ago, when people knew how to grow food and darn socks and breastfeed their babies.

Never before have so many known how to do so little.

But that's where the whole Make and Craft, DIY, cyberpunk ethos comes back in. I think people are very willing to reconnect to the basic skills that make life livable, and they don't need to go to Burning Man extremes to experience what it is to make biodiesel or a sustainable rooftop garden.

Andersen
I pretty much agree with everything you say here. The huge size of the well-paid media labor force during the second half of the 20th century was a function of a long moment of monopolies (and abundance). It's now a game of musical chairs, with hundreds of chairs being removed every week. However, while almost nothing I (and I presume you) have ever been paid to do is essential to life in a subsistence sense, your tendency to depict only physical labor — growing food, darning socks, manufacturing things — as "real" and productive strikes me as a kind of Romantic nostalgia. Moreover, if in your sustainable dream future we're all working for money only two days a week, we'll need lots and lots of things to read and watch and hear and discuss in order to satisfyingly fill up the other five days, no? And so one could see the steady expansion of the "unproductive" knowledge-worker class as the training-wheels period in our long transition to the massively leisured future you envision.

Rushkoff
Yes, yes. That would be the point.

Norbert Weiner thought that once we had machines to do the necessary physical labor and farming and such, we could all “work” as necessary to entertain ourselves and one another. I buy that, too.

Are we at or near that level of technological capacity? I just don't know how close we are — and it seems to me that the main obstacles are organizational, not practical.

But as the economy crashes, I do start to wonder (as I'm sure many unemployed San Francisco Chronicle writers are wondering) what the heck us writers and former writers can do to create value that people will feed us for.

Finally, I really do see a difference between those who create art/journalism/math and those truly unproductive or counter-productive forces (most of them speculators and derivatives traders) that don't create anything of concrete or abstract value. The video game programmer certainly creates value. The hedge fund trader, well, maybe the first couple of trillion dollars of hedging helps keep certain businesses honest, but the next few trillion of income is wasteful and extractive.

Lasky
It's the end of Friday, and I promised a five-day conversation. I'm happy to leave things here, facing an ideal future that looks a lot like Norway, where everyone does seem to work two days a week and enjoy nature and herring the rest of the time. Or you're free to make concluding statements, in which case I'll postpone my expression of gratitude to both of you.

Andersen
We will not in my lifetime be Norway, or even Denmark, which is one of the reasons I accused (?) Doug of being a utopian. Canada, maybe. I'm happy that we both agree that a radical rethink and reset is possible and urgent right now. Where we disagree is just how radical it should or can be. On good days — like today — I see the American glass as just barely half-full, and I think maybe Doug sees it as half empty — and badly cracked. But I'll let him put words in his own mouth.

Rushkoff
Honestly, I don't look at the glass as half-full or half-empty. I do believe we are dangerously close to screwing things up, but I also believe the steps we'd need to take to rebuild a more sane and prosperous economy are so very much simpler and micro than they may seem.

I do see us approaching the end of a model and the beginning of a new one — but I don't think that there's any abrupt, top-down, official change that will then augur a brighter Scandinavian day. All the machinations of big government — whether corporate bailouts or welfare — seem part of the same ill-fated effort to orchestrate an economy from the center.

The beauty of this highly decentralized era is that it offers us the opportunity to act in small ways, on the periphery. And these small actions lead to big effects — whether or not we ever get the credit for them. So actions as small as sourcing chard locally instead of at the supermarket chain, accepting a favor from a neighbor, or volunteering time to help improve a public school instead of spending money to insulate our kids from it, all go a long way. They help rebuild the social and commercial relationships that were quite systematically eliminated from our society as we surrendered more and more activity to the requirements of a necessarily expansionist market.

This activity will slowly but surely deflate the speculative economy, and require the largest companies that once dominated the landscape by default to instead provide value that the smaller economies can't: warplanes, computers, solar panels...

And it will help us recognize the difference between money and the many other human currencies already flowing between us.

Most of all, though, it's been a pleasure — an honor — to get to do a conversation with Kurt, who has long been one of my favorite writers and thinkers about all things cultural, social, and now historical and economic. He adds value to pretty much everything and everyone he encounters just by being there, and I feel lucky to count myself among them.

Andersen
Before I got to your last paragraph I was mentally composing a similar sentiment. Now it looks like I'm just dutifully responding in kind. But, well, the same back at you anyhow, Doug; an absolute pleasure. Civilized discourse lives.

Posted in: Books, Economy


Comments [1]

Thank you, gentlemen and Ms Lasky. Stimulating, challenging and even encouraging in light of the possibilities in front of us, the "bottom-up" community.
David Hernandez
08.06.09
02:31



Jobs | November 14