In the last few months there has been a resurgence of post-capitalist chatter flying around the valley. John Battelle, for instance, posted a widely shared note about “the reinvention of capitalism” after technology. At the same time, there’s been a dinner-time revival of the old conversation about the inevitable need for a guaranteed basic income in the United States.
This flavor of conversation flares up when times are good and people are feeling confident about technology. This time around, there’s a mini-euphoria about the rapid recovery of the public market from what felt like a downturn at the beginning of the year. And several technologies seem to be on the cusp of providing real opportunity for economic growth, including virtual reality, live video, connected cars, voice-based-home automation, reusable rockets, CRISPR, and maybe bots.
So, it seems like people are feeling pretty good in the Valley. They are—once again—starting to talk in mostly positive terms about technology reshaping the economy to the point of redefining capitalism.
I am as sure now as I have ever been that technology is driving a close to the era of traditional capitalism. But I am much less optimistic than most technologists appear to be these days about the nature of the transition. I worry that some of the openness, fairness and equality of capitalism will be lost. Things like basic income feel like an unfeasible pipe-dream. To me the future looks exciting, but also turbulent.
There are three major technology themes that are rapidly propelling us towards a post-capitalist future:
#1 The Sharing Economy / Driving Efficiency of Consumption & Deflation
For much of the previous hundred years technology has made production more efficient. Nearly limitless global demand has translated those efficiency gains into bigger markets and economic growth. This pattern has, for the last century, aligned technology with traditional capitalist growth.
As I have written before, the technological efficiency of our generation is different. The Internet generally, and communication software specifically, has made it easier than ever for us to efficiently share and utilize assets we already have (cars, homes, etc.). This efficiency of consumption, rather than efficiency of production, means that technology doesn’t spark more production and expand the traditional economy. Rather it shrinks the economy.
Uber and Airbnb drive massive efficiency of consumption and mean we need less housing and fewer cars per-person in order to get the same or greater utility as individuals.
This is wonderful for society, and can make specific companies fabulously valuable, but it poses a serious problem for traditional growth accounting. Sharing economy platforms are almost certainly GDP negative even if they are fundamentally good for the world and the environment.
And this is only the beginning. Self-driving cars are going to usher in the next big step by unlocking our ability to share far more things, dramatically driving down our need to have so many copies of products.
That trend is going to throw all the companies in these traditional industries—and reliant on modeled growth—into a tailspin.
The upshot is that the sharing economy is going to dramatically cut into the ability for capitalism to simply outgrow problems like inequality. We might be getting better off as a species, but deflation and negative interest rates are just getting started.
#2 The Social Economy / The Relative Value of Cash Declines
If a shrinking economy driven by better utilization and resource sharing wasn’t enough of a destabilizing factor, don’t forget about the re-emergence of social capital.
I have written before about the second coming of non-consensus social currencies. The basic argument is that throughout history we have always had forms of social and financial currency.
Since the industrial revolution financial currency, which is widely tradeable, has become more valuable because the things that improve our lives— textiles, automobiles, and washing machines—have been things which are dollar denominated and supplied by a global supply chain. That same culture created the material fetishism running up through the 1980s when the actual utility of capital declined, but material wealth was a social communication signaling platform.
In the last 20 years, communication technology has ushered in a resurgence of social capital, which was once limited to being exchanged among a small number of friends in local settings, but now has global salience and value.
I believe that the resurgence of globally fungible social capital is generally a good thing for people. It means we can meet, trust and trade favors with a much wider range of people than ever before without needing cash as a messy and inefficient intermediary. It allows for a far wider range of goods, services and trade to exist in the world.
But, from a viability of capitalism standpoint, every transaction that previously was financial and now becomes social is value destroying. When you stay at a distant friend’s house, or you have some people over for dinner at home rather than going to a restaurant, you are removing value from the cash economy.
Even more specifically, look at the collapse of malls, and in particular many large clothing retailers. The shift to e-commerce is part of the equation, but the other big component is that with Instagram and Snapchat, brands have lost their ability to sell people coolness for dollars. In most circles technology has propelled us into a world where status can no longer be bought at the mall.
The re-emergence of social capital on modern communications platform thus might be a good thing in many ways—but it drives down the relevance of earning and spending cash, which is fundamental to how we have been organizing ourselves for a long time.
#3 Virtual Reality & Abundance / The Pseudo-End of Scarcity
In many science fiction stories, from Snowcrash to Down and Out in the Magic Kingdom, VR and AR have dramatic economic implications.
Virtual reality and augmented reality experiences provide people with alternative realities in which to spend their time and lives when their traditional reality is underprivileged or boring for whatever reason.
This already happens. Videogames are a deep escape for many. But in time, VR will dramatically increase videogames’ appeal and reach. Similarly, stickers and now video overlays on social media services, which are a form of AR, decouple the nature of sharing and expression from reality.
There is nothing wrong with any of this. Allowing people to choose another reality or distort their reality in a way that makes them happy isn’t necessarily a bad thing. But when people can and do choose to opt out of our shared reality— spending the bare minimum to live and feed themselves—and instead focus their productive and intellectual lives in their own distinct virtual world, it puts pressure on participation in the traditional economy.
I believe in the not too distant future there will be a large number of people who choose inexpensive soylent for nutrition and VR over engaging in the traditional world, because their virtual lives are richer than their lives in reality.
When people can live in alternative realities that are un-dollar-denominated, and where value is pixels and has no fundamental scarcity or cost, the relevance of the traditional economy declines.
Technology is good, but not all good
All this brings me back to the most recent wave of techno-post-capitalist-utopianism. We have clearly moved beyond the point of arguing about whether technology matters or will imprint the world even more greatly going forward. It clearly will.
The thing I worry about is that instead of outgrowing traditional capitalism, technology is going to erode the base of capitalism in the next few decades. Rather than building on top of a strong capitalist base, we will be dismantling capitalism as we build something new.
Managing the transition of the economy towards the techno-future would be hard enough on the backbone of a healthy and growing traditional economy. But happening against a backdrop where most people are getting poorer in the traditional dollar-denominated sense seems very scary—even if technology gives them richer lives in many other ways.
We likely won’t be able to afford any sort of basic income framework as a society. And that is long before you consider the fact that unless you are willing to shut off immigration, instituting basic income in the US also effectively means instituting it for the world.
You can say what you will about the ills of capitalism, but it is fundamentally a very free and equal system. There is an openness and fairness to all dollars being equal that doesn’t translate to a sharing-social-virtual future.
I fear we are likely going to have to come to grips with a future that isn’t all that much like the relative openness and equality we experience now.
What comes next will absolutely have other strengths. People will likely be able to choose to live more freely and happily in a wider variety of realities. People will have more social opportunities to interact and share with each other. But it isn’t clear to me that we will be better off as a global society in an absolute sense.