The Persuasion Economy

What stands out about the newest multi-billion dollar, multi-national corporations, founded in the late 1990’s and early 2000’s (Google, Facebook and Amazon) is that two of them… hardly manufacture,  or sell, any physical products at all!!!

 

Something strange is afoot…

 

Though manufacturers are more productive than ever, they employ less workers and make less profit. They are victims of their own efficiency and are undercutting each other out of existence. So while the world is awash with cheap products and gadgets made by increasingly automated systems, most profits go elsewhere…but where?

 

To make secure profits, you have to ring fence some kind of monopoly. Broadly speaking, there are 5 modern monopolies:

• Land
• Attention/Trust
• Information
• Government Contracts
• Legal Fiat ( IP rights, Brand Ownership, etc., etc., )

 

I’ve previously mentioned how the monopoly of land works and how fiscal policy, a form of legal fiat, is systematically skewed to give newly-printed money to rich people for free. Well-connected contractors can also lobby governments to get taxpayer’s money for virtually nothing in return – the Iraq War  being a good example. Modern IP laws resemble the royal charters that monarchs of old issued to favoured merchants and guild masters. All these are lucrative streams of profits which armies of financiers, realtors, lawyers and lobbyists hired by rival corporations, battle against each other to secure.

This article focuses on one particular monopoly. The monopoly  of attention-trust.

Let’s begin with this self-evident statement:

“The simplest way to make money is to persuade someone to give you their money.”

Con-men are good at persuading people to pay them money for nothing. Snake-oil salesmen are good at persuading people to pay high prices for cheap items.

Whenever lots of people do something, we tend to think it’s O.K., but when Coca Cola persuades us to pay 50p for a can of carbonated, sugary water… is this really distinguishable from selling snake oil? And if that’s bad, then what about selling bottled still water at a similar per gallon price to gasoline?

Every day, fewer people work to produce items of actual value, and more people work to persuade others to buy cheaply manufactured items at prices far above their production cost. Armies of advertisers, psychologists, marketing researchers, influencers, celebrities, telemarketers, website designers and data analysts, work tirelessly round the clock to sell cheap products at inflated prices.

As production gets cheaper, physical products become little more than tokens to legitimize the exchange of money. Naomi Klein’s book No Logo discusses how many profitable companies increasingly outsource production and focus on marketing, brand building and design. Perhaps advertisers and brand managers can persuade you that branding creates “real value”  – they are, after all, master persuaders – but any industry that persuades people to buy products that cost 5 times more than identical products elsewhere is clearly selling snake oil.

The recent fascination of mainstream advertising with predatory religious cults is a red flag if ever there was one!!!

 

The Attention Economy

 

Broadly speaking:

Persuasion = Attention + Information

Persuasion + Overpriced Products = Profit

Facebook and Google lead the attention economy – by a mile. Of their 25 largest competitors  (not counting Chinese ones which don’t compete) all their revenues put together (except Amazon) are only 84% of what these two search and social giants make – and though Amazon has huge revenues, its profits compared to the Big Two are miniscule.

These companies’ business model is to capture our attention and information and charge sellers money to direct attention to their displays of products and services. They make large profits because attention is a monopoly – an hour gazing at one thing is an hour not gazing at something else. If everyone only looks at Google and Facebook all day, advertisers literally have nowhere else to go. In principle, these monopolies are not unbreakable, people can theoretically shift attention to something else at anytime. In practice, however, we are creatures of habit and the habitual use of something useful or rewarding, is hard to break. It is our habitual nature that gives Google and Facebook their monopoly over us and the virtuous (or perhaps vicious) cycle that content providers want viewers and viewers want content and both gravitate to where attention is, attracting yet more attention and yet more content.

In addition to attention, there is also a feedback loop in information. The more people use the Big Two,  the more data they get, relative to competitors, for market research and to train algorithms in order to create more user-friendly (or perhaps more captivating) products.

Facebook and Google provide many useful services. That’s why we use them. Nevertheless, there’s something unsettling about the idea that armies of psychologists, advertisers and analysts constantly monitor what we do, and influence what we see. As we spend more time gazing at our screens, a few powerful monopolies influence an ever larger share of our daily visual experience, harvest information about our digital activity and use it in sophisticated ways to sell us things.

Facebook and Google lie at the entrance to a much larger advertising funnel. Overall, the internet advertising industry, dwarfs even these behemoths. 4.1 million people in the U.S. currently work directly for the ad-supported internet industry which has had 20% annual growth since 2012. In the U.K.,  market research has grown by 62% and data analytics by 350% since 2012. All this sits on top of the emergence of hollow brands since the 1980’s.

 

PostCapitalism…Or Zombie Capitalism?

 

In 2015, Paul Mason’s book PostCapitalism predicted that the increasing economic importance of information would end capitalism. He argues that as the marginal cost of replicating and spreading information approaches zero and as information becomes the dominant economic commodity (i.e. when a solar powered 3D-printers and harvester robots can make most things from information) the marginal cost of everything would approach zero meeting all our needs in abundance. I’ve also written an optimistic article agreeing with this and a pessimistic one on how advanced weapons systems could also be manufactured in abundance.

Things take time and traditional drugs companies, car companies and retailers are still out there – becoming more productive, cheaper, and less profitable. However, looking at future trends, the newest big companies and the fastest growing sectors are not manufacturing, but the persuasion economy. Evermore people, psychologists, salesmen, internet marketers, website designers, celebrities, social media influencers, brand managers, search engine optimizers, analysts of all kinds and many more, are piling into the persuasion sector. An exponentially increasing flow of capital and labour is being invested into influencing – and perhaps eventually controlling – human behaviour.

And, unfortunately, this is something overlooked by PostCapitalism. While information is naturally abundant, attention will remain scarce and valuable so long as our brains remain unchanged. Furthermore, attention is something companies can ring fence, captivate and make a tidy profit from – more so than any other resource.

It’s certainly true that 3D-Printing, along with the miniaturization and generalization of manufacturing, erodes the underlying justification for economies of scale, and indeed the entire hierarchical capitalist mode of wealth production. Yet US and UK companies have never been more profitable. Arguably capitalism has never been stabler and more dominant and than it is today.

Why is this? How can obsolescence coincide with record strength?

The answer is that continuously falling costs of production have steadily transformed capitalism from a system of wealth production into a hollowed out, ever more naked, system of pure control. This is the irony : the less necessary capitalism is for production, the more surplus labour and resources it can devote to controlling and propagandizing the population.

The less capitalism is required, the more spare resources it has to perpetuate itself.

Once power structures are summoned into existence, they rarely retire gracefully.

…And this would not be the first time an originally useful system of organization transformed into a useless system of pure control…

The first civilizations developed in river valleys to collectively manage large scale irrigation ditch networks for watering crops. This required a centralized hierarchy and an army loyal to a despotic king to make sure each irrigation ditch digger pulled his weight. However, once a large army, loyal to one leader, was established, the political system spread far beyond regions that justified this mode of production. The river valley civilizations ignited an age of empires, and even those who weren’t conquered by river valley civilizations had to form hierarchical political systems in order to defend themselves.

Without intense conscious effort, an analogous fate could await us. The mythical honest, productive businessmen eager to turn a profit for himself while serving customers and making the world better – the flagship species of capitalism – is rapidly becoming endangered. They can still be spotted, huddling in rocks and crevices, but when you find one, far from prospering they are usually struggling to stay afloat. Most new money is accumulating in the system’s instruments of persuasion and coercion. The jobs of the future will be: defense contractors, surveillance companies, lawyers, accountants, tax officials, public notaries, financiers, traders, marketers, advertisers, psychologists, brands managers, politicians, regulators, social welfare officers, realtors, fund managers, economists, social media influencers, NLP coaches, self-help gurus, celebrities, website designers, search engine optimizers, telemarketers, marketing analysts, security guards…in an economy where less than 10% of workers produce goods in abundance for practically nothing but which perpetuates artificial scarcity with planning restrictions, IP  laws and sophisticated propaganda that convinces people, with increasing efficacy, to buy on credit excessive amounts of overpriced, disposable merchandise that soon becomes “unfashionable” or “obsolete”, attend over-hyped events and pay interest on their debts for the rest of their lives. Where a minefield of laws against copyright infringement, defamation of character and incitement of hatred, become so generalized that anyone with a large team of lawyers can sue anyone else for anything, where free speech dies the death of a thousand cuts and all political movements (that tell the establishment to take a one-way trip on ARC-B ) get litigated out of existence. Where all we need gets produced for nothing but where everyone has debt problems is stressed and constantly works their arses off at completely useless jobs as the high priests of economics shout in ever shriller tones that the sales price of a product IS its value to society. That if a sales team convinces customers to pay ten times an item’s production cost then BY DEFINITION they must have MADE the item TEN TIMES MORE VALUABLE and anyone who questions this logic is a HERETIC.

 

Is this really the future we want?

 

John

 

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