Transcription:
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Penny Crosman (00:03):
Welcome to the American Banker Podcast. I'm Penny Crosman. Have we all become serfs toiling under the merciless control of tech overlords like Jeff Bezos, Elon Musk, Mark Zuckerberg, Sundar Pichai, Satya Nadella, and Sam Altman? Yanis Varoufakis, a former finance minister of Greece and a professor of the University of Athens, has written a book called Technofeudalism: What Killed Capitalism. He's with us today to talk about his ideas and warnings. Welcome, Yanis.
Yanis Varoufakis (00:34):
Well, thank you for having me.
Penny Crosman (00:36):
So obviously you talk in your book about how all of us are at the mercy of big tech companies whose algorithms control a lot of our lives, the things we see on the internet, the things we can buy, how we buy things. What are some of the biggest harms that you see coming from this trend?
Yanis Varoufakis (00:58):
You'll excuse me if I try not to position myself as a doomsayer who says, oh my God, we live in a terrible world in which we are just serfs. I personally adore technology. I am addicted to my phone. I think AI is a testament to human creativity and progress, which we need to celebrate. My concern is that like with every other technological innovation or revolution, I should say, from the emergence of the Iron Age to the industrial Revolution to the second industrial revolution with the great vertical integrated companies like Edison and Westinghouse and Henry Ford, now we are going through a major transformation where a new form of capital has emerged, the owners of which have an extraordinary power. So just like iron led to remarkable advances in our civilization, but also to slaughter of whole populations, the industrial revolution led to serious victories against poverty and want, but at the same time, to the creation of new forms of the poverty imperialism, the destruction of Africa and so on, we have to be aware the fact that our digital technologies have created the new form of capital and with it the world in which we live in is no longer capitalist.
(02:35):
The way we understood it so far with its great potential for progress and its great potential for essentially diminishing us, as you said in your introduction to serve them.
Penny Crosman (02:52):
And just in case people are kind of unfamiliar with this idea, can you offer an example or two of how you see this playing out in real life?
Yanis Varoufakis (03:02):
It's not how it will play out, it's how it's already played out when we were not looking or paying attention. So my standard example is this: you enter amazon.com, you've exited capitalism. Indeed, you exited the marketplace, which sounds a bit paradoxical because at the moment you enter amazon.com, you find millions of sellers and of course like yourself, there are millions of buyers there. So that feels like a market. But my contention is that this is not a market and this is sales capitalism. My reason is this, if you and I were to walk into a farmer's market or indeed the shopping mall, we would see a market which is pulsating with a decentralized structure. In other words, you and I walk together, nobody tells us what to say to one another. We can look at the shop window and say, oh, look at this pair of trousers, cute or awful.
(04:01):
We see the same thing. We can decide to boycott the shop if there's something we dislike about it. If this is a sexist advertisement, for instance, or a racist advertisement. So decentralization is the main aspect of markets which made free marketeers, believers in capitalism from Adam Smith onwards, celebrate capitalism in amazon.com. There's none of that. Even if you and I are sitting next to one another physically and you have your laptop or your cell phone and I have my laptop or my cell phone and we enter amazon.com, and you and I were to type into this little search box, any product or service, like for instance, an electric bicycle or an appliance for your kitchen, you and I, even though we've typed the same thing, we're going to get different recommendations because the algorithm has been trained by us to train it, to train us, to train it, to train us, to train it, to know us so well that it can match us with particular sellers, capitalists who produce this electric bicycle, whatever kitchen appliance with the view to maximizing the probability that Jeff Bezos, the owner of the algorithm will extract 40% of the price we pay for it from the seller.
(05:20):
So this is not a market because everything is mediated through an algorithm. If you want a slave that belongs, is directed by and reports to one man, that, folks, is not a market. Welcome to technofeudalism. As I say, this is not just a moral point, it's a point about power in society because everybody who controls our interactions, the interactions of everyone, whether we are buyers or sellers or between buyers and sellers and can extract 40%, 40% of national income in the final analysis. Because when everything is online in this way, then 40% of national already we have 30, 35% of national income being concentrated in the hands of these people or the owners of this all of capital which are called climate cloud capital. The moment that happens, forget the moral aspects of it, the philosophical aspects of so much control by one person or very few people, there is a macroeconomic point, a point that has to do with the capacity of our economy to reproduce itself.
(06:31):
Because if 40%, 30%, let's say of national income is siloed off out of the circular flow of income because Bezos has so many billions, let's say you and I were to put together a billion dollars and send it to him, he wouldn't even notice it. He certainly wouldn't be able to spend it because there's so much money you can spend in 24 hours and even if he spends it, he may buy another island in the Caribbean, but that's not investment that exits the circular flow of think of the United States in Europe, everywhere. So if you've got this amount of siphoning off of value from the circular flow of income, that explains to a very large extent why the Fed in your country, the European Central Bank here in Europe, the Bank of Japan and Japan has such difficulty maintaining the flow of value and they need to keep printing money even though there's inflation.
(07:31):
So there's the macrogram. There is the philosophical point that no longer are we sovereign agents. The whole idea about Adam Smith capitalism liberalism is that each individual are the masters of their own selves. Well, but that's no longer the case, is it, because it's not just advertising. Fantastic advertisers, very clever advertisers, and I use Don Draper in my book extensively because I like Mad Man. They used to put ideas into your head about things you want to buy, but that was it. It was one way street from them to you. You went to the shop, you bought, end of story. Now we are constantly interfacing with these machines and they're machines. They're not human beings anymore. They're 24 hours a day, seven days a week there to be trained, to train us, to train them, to train us to train and to put ideas into our head as to what we need. So suddenly we're no longer sober individuals. We are, to put it dramatically, inching towards the matrix where the artifacts that our technological inventions are becoming our masters.
Penny Crosman (08:37):
And this is an interesting point in your book, I thought, not because of the singularity which people talk about, but you made the point that "machines like Amazon's virtual assistant Alexa, or even ChatGPT, Open AI's chatbot, they're nowhere near the feared singularity. They could pretend to be sentient, but they are not, and arguably never can be. But even if they themselves are stupider than a wet tea towel, their effect can be devastating, their power over us exorbitant," which I thought was really well put. Do you personally still have Alexa and do you use ChatGPT or would you recommend that people try to resist some of these super convenient devices and tools?
Yanis Varoufakis (09:24):
Oh, I do have them. You see, I don't think the problem's the technology, the problem is ownership of the technology. So in the same way that the steam engine was a remarkable advance in our capacity to do things, James Watt was a genius. He gave us a machine that can actually do a lot of the work, a lot of the chores that human being human hard as they say and say hard labor had to do. The problem is not the machine, the steam engine or the algorithm. The problem is who owns it and what do they use it for. So compared to contrast, Uber with a cooperative of taxi drivers in Chicago or in New York or in dental, we use an algorithm in order to provide a good service to their customers in juxtaposition to Uber, which uses the same algorithm to exploit both the drivers and us, the users, because it steals our data to sell it to Amazon, to sell to Google, to sell it to Facebook, to sell it to whoever, to Alibaba in China. And at the same time, it turns the taxi drivers that it uses into mindless soul destroyed machines. So the algorithms of issue ownership
Penny Crosman (10:52):
In this feudal world that you see us as living in, our audience is the financial industry in the U.S., what do you think the role could be of the financial system or what should it be in these circumstances? For instance, do you think banks have more of a moral imperative to try to lend to small businesses or maybe small farms versus focusing on the really large companies that are part of the feudal order?
Yanis Varoufakis (11:33):
Well looking bankers and financiers in the eye, I have to say to the that I do not hold them responsible for technofeudalism, least because their your audience is incapable of doing the right thing. And this is not the moral criticism of you personally. Financiers must, if they're going to be loyal and faithful to their charter and to their shareholders, they must do whatever it takes to amass financial gains for their shareholders. In a world where, for instance, very recently, a couple of days ago, Morgan Stanley wealth management reported that the index concentration is so self-correcting, and you have the magnificent servant who have acquired the capacity to move markets. Well, financials cannot go against that tsunami. So the responsibility as far as I'm concerned, lies with politics, with our elected representatives, our senators in your case, and the house of reps here in Greece, our parliament. They are European parliament. We have a duty to change the rules of the game. Financiers who do the right thing will go bankrupt, and I cannot possibly recommend to people that they should go bankrupt. It is what our political system puts together in the form of norms, laws, and institutional frameworks that makes the difference between a society that uses the technology as a servant of the citizenry or the other way around.
Penny Crosman (13:35):
What might such rules look like or such laws look like? What kinds of reins would you want to see put in place?
Yanis Varoufakis (13:46):
Well, to begin with, I would like to see the imposition of a very serious cloud tax. I would say something like 5%. So to give a comparative advantage to bricks and mortar shops and manufacturers, people who actually sell stuff from within their own companies using algorithms perhaps for their own proprietor algorithms, but algorithms that they either own themselves or they own jointly with other similar companies. I would like to see from companies that with a certain revenue above a certain level trade on the internet to be charged a cloud tax of 5%, 5% of revenue is not nonprofits. That creates a substantial fund for the government to help with the creation and the production of value to perhaps distribute in the form of a basic income to all service out there, including you who are working for cloud capital and unwittingly and creates a competitive advantage in the marketplace vis-a-vis amazon.com, Alibaba, and all these cloudalists as they're called.
(15:02):
That's one thing you could do, for instance. Secondly, if you really want to go more radical, and I recommend it because that's me, I'm a radical lefty after all, full disclosure folks, I would like to see three further moves that some may agree with, some may disagree with. One is I would like to see our governments, our state provide us in the same way that they provide us with a passport and driver's license by which to identify ourselves in the analog world. I would like arc stage to provide us with a digital identity with which to identify ourselves because a lot of that cloud rent and cloud capital is predicated on us not owning our digital identity. It is quite remarkable. I find this preposterous that whereas in the a analog world, you have a driver's license, which you pay what, 20, 30, 40 bucks and you get it and you can prove who you are.
(16:03):
You can do this on the internet. On the internet, you have to go some corporation and beg, beg the corporation to testify to who you are, whether this is a bank, Google, Facebook, whatever. That would make a huge difference. Imagine if you could, instead of downloading any app by Uber or Lyft in order to get a taxi service, you could say there's an app that's publicly owned, really very simple one, and you put out a ping and you say, my name is Penny. I'm on such and such street, and I want to go to the airport. Who wants to take me? And anyone who wants to take you, who is listening through their own algorithms or any way that I have to listen to interface with you can say, oh, I'll take you. Or even the public transit Authority can say to you, don't be silly.
(16:53):
There is a pass around the corner that will take you to the Uber airport or train, but that you cannot do today because that's why you need to go into Uber because Uber gets from your Bank of America or C Bank or whatever your id. So that's one thing. Publicly provided means by which we can identify ourselves in the digital world. Number one, it's not that radical, but it would have a huge effect. Secondly, imagine a world in which the conditions for Facebook to operate for Alibaba, for TikTok, for all of them. And now do not make that silly distinction between Chinese owned and Silicon Valley owned. Lump them all together under cloud capital. The condition for operating is that you know what folks? We are producing most of your cloud capital through our posts, our videos, our pings, our location, our texts, whether our tweets in the case of Leonard Musk, we are producing your cloud capital and we get no dividends.
(18:10):
You get all the dividends. Now to make it very, very, very simple, say, okay, you want to operate in the United States of America, 20% of your sales will have to go to a social equity fund that is publicly accounted for, and the dividends that accumulate are distributed to all Americans since everybody's contributing, whether they like it or not, to that cloud capital, the form of a basic income. Now, I don't think this is very radical. Essentially what I'm saying is that we are creating their capital and we're getting no returns. Where is the justice in this? Where is the economic logic in this?
(18:46):
Let me add one more suggestion as to what could happen, and that I think is going to madden and really upset some of your audience, but let's try it out anyway. Imagine if the Fed were to provide each resident in the United States and here in the Eurozone, in the Euro area of the European Union, the European Central Bank were to provide each one of us if we wanted it, a free digital wallet that is associated to our, in your case, to Social Security number, in our case to our tax file number free on the phone, no bureaucracy whatsoever. You get a PIN, you can direct your salary to go to that. Then you have 100% guarantee by the Fed because it'll be part of the ledger of the Fed and you can transfer money one another or two private bank accounts or overseas at the touch of the button.
(19:46):
The technology is there. It can be done tomorrow morning. The only reason why it's not happening is because Wall Street doesn't want it because they want to maintain the monopoly over payments. And my question to bankers is this, what gives you the right to own the monopoly of payments? Supposedly, I'm in a professor of economics, right? For decades, I have been fooling my students along with every other professor of economics. We tell a big fib a big lie to students that banks are intermediaries that we take, that banks take savings from the savers and they provide it as loans to the borrowers. That's not what banks do. That's a tiny, tiny, tiny smidgen of a part of what bankers do. Primarily bankers have the monopoly of payments. So if you want to buy a coffee from Starbucks, you need to have a bank account with Bank America to have the card in order to be able to or have the app on your phone.
(20:41):
So you like competition, you want financial innovation, have the Fed provide everyone with a free digital product and then a free digital wallet, I should say. And then of course, the banks can try to better this deal by offering customers something that goes beyond payments. So if you put all these three together, three, four suggestions together, and finally a digital bill of rights to be added to our constitutions, to the American constitution, to the Greek constitution, whereby you own your data, imagine that. Imagine what the revolution does would be. Now, if we were to do all that, it would be no techno. But Penny, I bet you that any president member of the House of Representatives, Senator Parliamentarian here, European parliamentarian here, they say that will be immediately demonized, vilified, and shot down by a whole cabal of interests that will be so deeply disconcerted by it, but it is a fight that we need to give.
Penny Crosman (21:53):
I suspect you are correct on that count for sure. So just to push back a little bit, your first idea was about, I think a government-run digital identity service, and your third idea was about a government-run digital wallet. And I feel like at least here in the United States, the government is not the savviest purveyor of technology. It's hard for the government to hire the best technologists, the best technologists work at Google and Facebook and OpenAI and the futile companies. How do you think the government might get the technical prowess to offer these kinds of centralized services?
Yanis Varoufakis (22:47):
Two points. If I make first, it's nothing spectacularly technologically advanced that you need. The government has the technology to give you a driver's license. Here's the TE to provide you with a digital identity. The Fed has whatever it takes, whatever is necessary not to provide you with a digital wallet. And if they don't, they can always hire the private sector to do for them. And NASA is hiring SpaceX to go to the moon. Surely the Fed can hire one of these WHI kids to provide you with a digital. Technically, it's not even an interesting rejoinder, but allow me to be a bit more animated in my second point. Penny, you come from a country where the state has produced the greatest technological innovations in the history of the world. If you take an iPhone, take an iPhone, everything in it, which makes it successful and important, has been produced in some government laboratory or by some government grant.
(24:01):
I mean, the United States went to the moon on the basis of fully fledged public service called NASA. The internet was invented by the state. It was put forward by the state. It was built by the state. It was given to US academics. I used the internet before it was called the internet. It was used to be called in Britain. Britain at, it was called Janet, the Joint Pandemic Network. It was built all on American public infrastructure. It was a United States. The government provided commons to say that the American state cannot do that is an unwarranted diminution of the capacities of your state
Penny Crosman (24:45):
Fair. So Yanis, where or how should people buy your book? I'm assuming you don't want people to go to Amazon.
Yanis Varoufakis (24:54):
Well, Melville House is my publisher. They have a very nice little electronics bookshop. There are all sorts of bookshops. Try to find a bookshop in your area, which is independent and go and order it from there. We need to support small bookshops because there are little mini libraries, many communities of learning with every bookshop we lose. We lose part of our humanity. We need support them.
Penny Crosman (25:20):
I totally agree. Well, Yanis, thank you so much for joining us today, and thank you all for listening to the American Banker Podcast. I produced this episode with audio production by Adnan Khan. Special thanks this week to Yanis Varoufakis. Rate us, review us and subscribe to our content at www.americanbanker.com/subscribe. For American Banker, I'm Penny Crosman and thanks for listening.