For 75 years now corporate profit, over their
total value, has been decreasing. That means corporations are really good at accumulating
money but increasingly worse at deploying that money, at making money with money. This
is really serious. Pharmaceutical companies don’t know how to make drugs, they only know
how to acquire companies that do. Google even is no longer a technology company; Google
became alphabet. It’s a holding company. Google’s new business is buying and selling technology
companies. They bought a robot company, now they sold the robot company. So they might
as well be Goldman Sachs or Merrill Lynch or somebody. They are a meta company now because
they don’t know how to create value. That’s because they’re using a bankrupt method.
They’re using a 13th century corporate operating system to run digitally enabled businesses.
What I’m arguing is that 13th century model is obsolete. It was based on going to South
America and enslaving people and taking their precious metals. It doesn’t work for a digital
economy. It doesn’t work for an economy where people are buying and selling and trading
and making videos and exchanging value. And if you want to do well, if you want to actually
make money you have a better shot of it by creating circulating value. Think eBay not
Amazon. Think Bitcoin not Uber and you’re slightly on the path. It’s a peer to peer
networked economy that we’re moving into. If you can conceive of that, if you can get
yourself out of the frame of mind where you want to get the ring the bell on the NASDAQ
stock exchange, you’re not going to get to do that. I promise you. You’re not. That’s
not the way to go. You don’t want to sell your business; you want to run your business
and make money doing your business. And you have such a better chance of becoming a true
millionaire and doing it in a way that’s not taking value from other people but is actually
promoting business activity on a wider scale and on a more distributed scale than was possible
back in the Middle Ages. Right now most CEOs are selling off their
best businesses, they’re cannibalizing their most productive enterprises in order to show
short term growth to shareholders. That’s actually bad for the long term success of
the business because without successful revenue generating industries it’s hard for the business
to keep going. They actually need revenue. You need to be selling something. You need
to make money in an ongoing way. I know that’s heresy. I know. I get it. I
get it. I realize that’s bizarre to say it. But the way to communicate that to shareholders
is to say look, you’re going to start making dividends. Dividends are okay. You’re going
to make money for owning my shares of stock. Now what we have to do is start looking at
the tax code to stop punishing revenue generating businesses and instead start punishing ones
that don’t generate revenue but just try to grow the business at the expense of the economy.
That’s not hard to do. We have to increase the tax on capital gains and decrease the
tax on dividends. This will encourage businesses to make money rather than to just eat themselves
in order to show growth. How do we help people create value rather
than suck it out? How do we help businesses and neighborhoods circulate value rather than
take money off the table? So, you look at a bank. All a bank has to do, and they just
call it an experiment. It’s not a new banking system. Don’t worry, just a little experiment
in a couple of towns. So, normally a pizzeria wants to do an expansion. They come to the
bank and they say look, we want to expand, put in a ladies restroom separate from the
men’s; we need $100,000 to do that. The bank will give them $100,000 eight percent interest
and in ten years you pay back your loan. What the bank should do instead is a look, Luigi,
we love your idea for an expanded restaurant; we’ll give you $50,000 towards that expansion
if you can raise $50,000 from your community through crowd sourcing. So what we’re going
to do is put this $50,000 aside for you and we’re going to give you this tool, this app
that we’ve developed, which will allow you to raise money from your community. What you
do is you ask your patron for $100 now and then they can get $120 of pizza at the expanded
restaurant. So the customer now is making 20 percent back
on their money, which is better than they’re going to do in the stock market or anywhere
else. They get $20 back. You get to pay back half your loan in interest but half your loan
in pizza, which is cheaper to you than capital. We get, as a bank, we get your proof of concept.
We can see that okay your community really does want to support this. And the community
now gets to invest not just in the S&P fund, not just in some mining company in the Philippines,
but they get to invest in their own main street. They see their restaurant expand. They see
the property values go up. They see their tax base get better. They see their public
schools get better. And they see a business – they relate to a business now as community
members. So now the bank is seeing less as the pure extractor of value from this town
and the exclusive purveyor of capital and instead as the facilitator of local economic
activity. Now why is that important? Because if Rushkoff
is right, if Pakiti is right and capitalism is itself about to crumble under its own weight,
what is the role of the bank going to be on the ground? Can the bank establish itself
as something other than the pot of money? Can the bank reposition itself as an expert
in how to facilitate local commerce? If they can do that then there’s a place for them
in the digital economy as well as the current one. Another simple idea. Say you have a supermarket
chain and we all know that supermarkets are being looked at now as the extension of big
agra and an unsustainable long distribution chain of food, everybody wants to go to the
local local and the community supported agriculture and grow their own stuff, how can the supermarket
chain look like something better than Walmart, just this big industrial wasteland? Well,
what if they open their parking lot on weekends to a farmers market? You can charge for spaces
if you really want. But more importantly you just allow that activity to happen. You’re
seen as a partner in that activity rather than as a competitor to that activity. Yes
people might start to favor buying produce and agricultural products from that farmers
market. Okay. But maybe the farmers market does that better and what do you do better?
You do packaged goods. You do long distance stuff. You do cans. You do frozen. You do
what a supermarket does best. This way you’ve shown yourself really as able to specialize
in what you do and at the end of the day when that farmers market is done you take all the
groceries, you take all the produce that wasn’t sold, buy it at a discount from the local
farmers and sell it on your shelves Monday Tuesday and Wednesday. So again, it’s a simple way for a supermarket
to see its competitors, not as competitors at all but as partners in food and then you
will become the hub, the locus of this activity, of this value creation. It’s a matter of seeing
this other activity less as a leak, less as a drain on your revenue and more as a source
of exchange, as a source of value creation because if your town is bankrupt, if your
town has no way to create value, they’re not going to be good customers anyway. Walmart
is right now closing stores because after 20 or 30 years of operation it’s bankrupted
it’s communities. It doesn’t let anyone else create value and that doesn’t work in the
long run, it only works when you have a scorched earth flip this house approach to your business.
But if you’re not going to sell your business, if you want to stay in your business you’ve
got to find ways for your customers to create and retain some value, otherwise they go away. But I get it. This sounds like communism.
I know that. But the thing is it’s the other one that’s communism. It’s the other one that’s
communism. Make money for a living. Work for a living. This is cool to work for a living.
It actually is fun and you have customers and they want what you have and you sell it
to them for a profit. So you take how much does it cost you to make the thing, you add
something to that and then sell the thing to someone else and you end up with more that
you started with. It’s just genius.

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100 thoughts on “The Digital Economy Should Be about Capital Creation, Not Extraction”

  1. You're trying to convince a business who got to where there are today by disrupting market to allow market disruption ;p

    Business shows no pity, if there is anything they know best, its that, there is no such thing as brand loyalty. Facilitating a competitor, well, thats a nice shit lol.
    You're better of convincing them to take acquisition of their competitor, rather than telling them to "hey, it could be nice for the world if you could revamp your business model and allow others to enter your current market."

  2. in anglo countries, specially middle of north america there are so many liabilities, so many law suits… It's hard to believe a parking lot doing farmer's market….

  3. The argument is quite brilliant. However I would like to point towards his statement "this 13th century model is obsolete, it was based on going to South America and enslaving people and taking their precious metals", which is true except that the European conquest and colonisation of the American continent took place in the 16th century.

  4. I call bullshit. This guy is a dinosaur. Google not creating value? Creating AIs that can reduce significantly the cost of healthcare, this is creating values. Maybe not for the company, but for the society, yes. Imagine all the hardware you would have to buy to have the equivalent of what in your phone in the 80's. That's an hefty amount of value. And try to imagine Google shut down now. OK, I know, don't do that too long. He is still in the 13th century and doesn't have a clue.

  5. This won't work in revitalizing dead areas of the country. Those areas need more direct investment. But for other areas that are either growing or mantaining vibrance, this could indeed work. I like the community investment aspect ofnitof it

  6. All these ideas takes strong ethics, self restraint and leap of sight. Capitalism inherently do not promote this I believe, as my understanding is capitalism is self centered.

  7. Country is run by they extreme wealthy, they are not interested. They just want to buy Da Vinci paintings for $400,000,000

  8. Companies have been doing crowd sourced loans for a long time now. Remember discounted gift cards? It's esentially the same thing.

  9. Not sure why he claims Google is worse than ebay. Adsense, adwords, youtube, and Android OS are all transaction facilitators.

  10. We need our tax policy to reflect exactly what you are saying. In other words, the current GOP tax plan is exactly the wrong thing. If we stop taxing active income and increase the tax on passive income, we as a country will encourage work, and discourage merges and sales of companies.

  11. What if the companies shut down the internet by destroying net neutrality? Does the extraction method begin to work again at that time?

  12. After many attempts, capitalism finally managed to destroy itself.
    Time to ditch that primitive, oppressive and erratic economic system and move on.

  13. from which english speaking country is he comes from???? he said "Supermarket"….. i though in the us its called "grocerystore"………..

  14. Does he not see that thinking you have to actually provide a good or service to generate wealth is a 13th century mindset? You just gotta have confidence in the brand you inherited [or decrease confidence in the competitors']
    a e s t h e t i c s

  15. Why can't people understand that for the most part , corporations and or rich people get rich from producing a product or service that people are willing to buy at their own free will. What is so hard to understand about that?

  16. It doesn't sound like communism, it sounds like socialism: allowing a community to grow and prosper together, and working together for the good of it, rather than breaking it down and extracting all of its value. It's the obvious way to work together and move forward.

  17. I'd link this to a resource economy where we move away from money and trade with our knowledge and skills etc… and share what we already have. And create a circular economy instead of a throw away society.

  18. It doesn't matter how many small businesses start or how many times we improve technology anymore. Efficiency and over population is the biggest threat to all populations. Wealth was only ever generated by exploiting someone else. There will always be a need for an underclass to exploit. The only drive any individual will ever have is to try and get as far above that underclass as they can. Sad, really.

  19. Value creation, wealth creation, and thinking in a practical rational way about economics, let's call it benevolent capitalism.

  20. I bet that if his guy had some big money making company he'd refuse to sell it to a huge company, since buying/selling companies is evil, apparently.

  21. A great bakery used this 120 for 100 deal to subsidize their move and purchase a building. They were a hot business. I wouldnt see many businesses being seen this hot

  22. It's just terrible that anyone would confuse any of that with communism. None of that had anything to do with communism or even socialism.

  23. in a Darwin economy : we use all means to make money. Google is doing pretty damn good job while ebay goes nowhere.

  24. Let's not be authoritarian and don't steal from others – – > no taxes. And let's get rid of banks as we know them, central banks that try to manage the economy are a communist consept…

  25. You do realize that Columbus "discovered America" in 1492 which is the 15th century. Would've been pretty tough for the 13th century to make money from South America when they didn't know it existed yet. Also note that many of the early American currencies during the 18th century actually had expiration dates both to reflect the value of perishable commodities and to discourage accumulation of wealth versus reinvestment. Seems to me that you did not do any research and are just spouting personal opinions without presenting any valid arguments for them.

  26. The problem is that this assumes a utopian "community" exists. People move. Neighborhoods change. Competition adjusts. Politicians are crooked. People sue. Capitalism has destroyed the possibility of this ever happening until it itself is destroyed. That will require tributaries of blood running the streets first and I hope I don't live to see it. Notwithstanding, good ideas.

  27. It does not at all sound like communism – at least not to a European (as a German I had a first-row seat to watch communism at work, luckily from the other side of the wall). It actually sounds *old-style*, pre-capitalistic. And it might actually be a way for banks to survive (they do get more and more problems with their traditional and new-fangled business models alike). He might be up to something worth looking into.

  28. Hoarding money causes money to stagnate. Money can't do the job it needs to do unless it's flowing freely. When individuals & businesses are allowed to HOARD money, to take it out of circulation & tuck it away in big piles, we are allowing them to actually destroy the real value of that money. Hoarded money is money that has ceased to exist to the rest of the world. It doesn't even help the hoarders – stagnated money shuts the money machine down for EVERYONE.

  29. But if I have no education; no skills, no knowledge, and no imagination for the creation of new products, then the only way I can make money is by buying and selling other peoples skills, and wealth. Right?

  30. …I don't know what this guy is smoking, but extracting wealth is way easier when you can influence government to allow you to do it. So the rich extract, and screw the rest of us…the new normal.

  31. People suck and we will kill ourselves until we self extinct! We are all currently suffering because we are selfish, lazy, and ignorant!

  32. P2P has some merit and future. However, if Reagonomics has legitimacy these days, we are all threaten in the modests gains, for what Reagan did best is lie….

  33. This guy is talking everything I've been designing around for years to create … I need to reach out to him.

  34. I would never invest money in a pizza shop in exchange for pizza, because the pizza I receive in exchange for my money is:
    1) Worth less than the money.
    2) Guaranteed to depreciate in value very quickly.

    I suppose I might be able to sell my interest in the pizza (before claiming it, so the pizza is fresh) to someone else for slightly more than it cost me, but that seems like more work for less income than simply doing a little overtime in my regular job.

  35. Sadly, the current model does work extremely well in an egoistic, short-term sense. It does not work in a societal, long-term "big picture" sense of "economy".

  36. He said what is needed to solve the whole ordeal. Just remove corporate tax and decrease dividend taxes. And keep capital gains at or about 1/3 of profit/loss. This will incentivise processes that are sustainable.

  37. if i know marshmallow experiment, people like to see tangible results asap, i don't know may people who are willing to wait till the building is constructed and then committing to the idea of getting 120 dollars worth of pizza in the future over a long period of time, and i am sure realistic businesses will require a lot more monetary commitment for longer period, most of the time in millions which is not a secure personal level investment to encourage crowd funding, it could work but persuading so many people to bet on a potential business is a tricky business because the business could fail and because of marshmallow experiment, banks have ways to get their money back even if the business fails, not in personal level dubious investments

  38. you kinda sorta need both, you need some companies to buy, develop and sell companies and you also need new business ideas, the reason why you need the big parental companies is that they have the resources to give a new idea platform they otherwise wouldn't have gotten because of lack of resources, for new ideas,you need proper education, not a business model, ideas come out of brain, not a business model

  39. While he is right that there are moral issues with tech corporations, he makes the worst arguments against them. It's like controlled opposition.

  40. The people running these companies make tons of money. Claiming "it doesn't work" won't change that. You won't convince them that their billions of dollars don't exist.

    Do you take issue with the morality of their actions? List the immoral actions that would concern consumers and offer a pragmatic solution.

  41. PROFESSOR OF MEDIA THEORY ?? WTF That's taken fucking a – whos paying that bill. I want belly button fuz theory .. THOSE WHO CANT DO .. TEACH >. and this guy is taching .. STUPID and Minor in LEACH ..

  42. Couldn't continue listening to Professor Clown.
    His kind are really dangerous when they talk about economy while hold irrelevant nonsense major.
    Milton Friedman is turning in his grave right now because of these people talking about things they do not understand.

  43. Generally I don't agree with this guy. But in this video he made several good points. I lived through the dotcom bust. Basically, successful entrepreneurs would build businesses then sell them. Soon after the business would go out of business. The reason was obvious once the entrepreneur and visionary leaves the business the business is blind. This is another reason why socialism fails because their goal is to remove the capitalist from the business.
    He should have mentioned GE they were notorious for not creating value in recent years and now their business is failing apart. Part of the problem was the tax code incentivized increasing stock value rather than profits. This is what happens when socialism interferes with capitalism. If the tax code was changed as he mentioned in the video a lot of the damage done by the government would be repaired.

  44. "You need to be selling something. You need to be making money in an ongoing way. … I know that's heresy."

    This should really tell you something about the way the economy is run

  45. He got point … make sense . Uber driver is Medicare and uber worth over 100 billion ???? First when I start driving for UBER it was 15% cut for uber in 3 Years uber takes 30% of the Driver’s income

  46. The bizarre part is, he seems to think he's making a new criticism (he cloaks himself in being a glorious heretic!). Dude, this is really, really old heresy, and I suspect his gray hair means he's old enough to know this.

  47. It's about producing something, selling it, earning money – instead of merely transacting in shares or pumping up value (e.g. buybacks). But this is not an either-or proposition: think Apple. Apple innovates on products that people want, while giving love to their shareholders.

  48. I see the problem in the underlying layer, research and development by corporate titans. It is cheaper and a safer bet to buy new ideas.
    Digital Economy ??…? This is just a means of communication, not a wealth or job generator. It harvests existing wealth. Production is highly automated and labour is sourced in foiegn labour markets. It is withering as the latest fad. While many analyze the gini, it is equally evident there is deflation in the lower half of the economy. Those involved in the consumption are facing rising prices as annual income rises but the prices are falling in the lower segment (deflation). A handful of department chains are caught in this phenomenon, the must price low enough to keep their volume high and in doing so profit becomes an opportunity cost.
    Ken Bowd

    When there is no food on tables or roofs overhead, priorities will align. Oh I know, lots of homeless people keep a cell phone. It is their final tie to better times for a hundred bucks a month. This is a tenth of a roof over head which costs a thousand bucks in Canada. The homeless are in survival mode and will be where the next socio economic turn over begins.
    The French revolution needed the printing press to become popular. Currently the digital reach is global.
    Ken Bowd

  49. Why is the name of the owner of the Pizzeria? Isn't that racist and gender biased ? Why not Kevin or Jerome or Mohammed or Elizabeth? Those liberals!….. heheheheheheheheheheheheheh

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