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The Digital Economy Should Be about Capital Creation, Not Extraction | Big Think - YouTube
Channel: Big Think
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For 75 years now corporate profit, over their
total value, has been decreasing.
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That means corporations are really good at
accumulating money but increasingly worse
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at deploying that money, at making money with
money.
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This is really serious.
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Pharmaceutical companies don't know how to
make drugs, they only know how to acquire
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companies that do.
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Google even is no longer a technology company;
Google became alphabet.
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It's a holding company.
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Google's new business is buying and selling
technology companies.
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They bought a robot company, now they sold
the robot company.
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So they might as well be Goldman Sachs or
Merrill Lynch or somebody.
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They are a meta company now because they don't
know how to create value.
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That's because they're using a bankrupt method.
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They're using a 13th century corporate operating
system to run digitally enabled businesses.
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What I'm arguing is that 13th century model
is obsolete.
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It was based on going to South America and
enslaving people and taking their precious
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metals.
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It doesn't work for a digital economy.
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It doesn't work for an economy where people
are buying and selling and trading and making
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videos and exchanging value.
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And if you want to do well, if you want to
actually make money you have a better shot
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of it by creating circulating value.
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Think eBay not Amazon.
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Think Bitcoin not Uber and you're slightly
on the path.
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It's a peer to peer networked economy that
we're moving into.
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If you can conceive of that, if you can get
yourself out of the frame of mind where you
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want to get the ring the bell on the NASDAQ
stock exchange, you're not going to get to
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do that.
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I promise you.
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You're not.
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That's not the way to go.
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You don't want to sell your business; you
want to run your business and make money doing
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your business.
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And you have such a better chance of becoming
a true millionaire and doing it in a way that's
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not taking value from other people but is
actually promoting business activity on a
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wider scale and on a more distributed scale
than was possible back in the Middle Ages.
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Right now most CEOs are selling off their
best businesses, they're cannibalizing their
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most productive enterprises in order to show
short term growth to shareholders.
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That's actually bad for the long term success
of the business because without successful
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revenue generating industries it's hard for
the business to keep going.
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They actually need revenue.
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You need to be selling something.
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You need to make money in an ongoing way.
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I know that's heresy.
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I know.
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I get it.
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I get it.
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I realize that's bizarre to say it.
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But the way to communicate that to shareholders
is to say look, you're going to start making
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dividends.
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Dividends are okay.
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You're going to make money for owning my shares
of stock.
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Now what we have to do is start looking at
the tax code to stop punishing revenue generating
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businesses and instead start punishing ones
that don't generate revenue but just try to
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grow the business at the expense of the economy.
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That's not hard to do.
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We have to increase the tax on capital gains
and decrease the tax on dividends.
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This will encourage businesses to make money
rather than to just eat themselves in order
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to show growth.
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How do we help people create value rather
than suck it out?
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How do we help businesses and neighborhoods
circulate value rather than take money off
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the table?
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So, you look at a bank.
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All a bank has to do, and they just call it
an experiment.
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It's not a new banking system.
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Don't worry, just a little experiment in a
couple of towns.
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So, normally a pizzeria wants to do an expansion.
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They come to the bank and they say look, we
want to expand, put in a ladies restroom separate
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from the men's; we need $100,000 to do that.
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The bank will give them $100,000 eight percent
interest and in ten years you pay back your
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loan.
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What the bank should do instead is a look,
Luigi, we love your idea for an expanded restaurant;
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we'll give you $50,000 towards that expansion
if you can raise $50,000 from your community
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through crowd sourcing.
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So what we're going to do is put this $50,000
aside for you and we're going to give you
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this tool, this app that we've developed,
which will allow you to raise money from your
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community.
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What you do is you ask your patron for $100
now and then they can get $120 of pizza at
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the expanded restaurant.
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So the customer now is making 20 percent back
on their money, which is better than they're
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going to do in the stock market or anywhere
else.
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They get $20 back.
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You get to pay back half your loan in interest
but half your loan in pizza, which is cheaper
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to you than capital.
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We get, as a bank, we get your proof of concept.
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We can see that okay your community really
does want to support this.
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And the community now gets to invest not just
in the S&P fund, not just in some mining company
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in the Philippines, but they get to invest
in their own main street.
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They see their restaurant expand.
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They see the property values go up.
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They see their tax base get better.
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They see their public schools get better.
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And they see a business - they relate to a
business now as community members.
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So now the bank is seeing less as the pure
extractor of value from this town and the
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exclusive purveyor of capital and instead
as the facilitator of local economic activity.
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Now why is that important?
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Because if Rushkoff is right, if Pakiti is
right and capitalism is itself about to crumble
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under its own weight, what is the role of
the bank going to be on the ground?
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Can the bank establish itself as something
other than the pot of money?
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Can the bank reposition itself as an expert
in how to facilitate local commerce?
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If they can do that then there's a place for
them in the digital economy as well as the
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current one.
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Another simple idea.
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Say you have a supermarket chain and we all
know that supermarkets are being looked at
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now as the extension of big agra and an unsustainable
long distribution chain of food, everybody
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wants to go to the local local and the community
supported agriculture and grow their own stuff,
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how can the supermarket chain look like something
better than Walmart, just this big industrial
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wasteland?
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Well, what if they open their parking lot
on weekends to a farmers market?
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You can charge for spaces if you really want.
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But more importantly you just allow that activity
to happen.
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You're seen as a partner in that activity
rather than as a competitor to that activity.
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Yes people might start to favor buying produce
and agricultural products from that farmers
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market.
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Okay.
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But maybe the farmers market does that better
and what do you do better?
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You do packaged goods.
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You do long distance stuff.
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You do cans.
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You do frozen.
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You do what a supermarket does best.
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This way you've shown yourself really as able
to specialize in what you do and at the end
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of the day when that farmers market is done
you take all the groceries, you take all the
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produce that wasn't sold, buy it at a discount
from the local farmers and sell it on your
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shelves Monday Tuesday and Wednesday.
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So again, it's a simple way for a supermarket
to see its competitors, not as competitors
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at all but as partners in food and then you
will become the hub, the locus of this activity,
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of this value creation.
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It's a matter of seeing this other activity
less as a leak, less as a drain on your revenue
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and more as a source of exchange, as a source
of value creation because if your town is
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bankrupt, if your town has no way to create
value, they're not going to be good customers
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anyway.
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Walmart is right now closing stores because
after 20 or 30 years of operation it's bankrupted
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it's communities.
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It doesn't let anyone else create value and
that doesn't work in the long run, it only
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works when you have a scorched earth flip
this house approach to your business.
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But if you're not going to sell your business,
if you want to stay in your business you've
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got to find ways for your customers to create
and retain some value, otherwise they go away.
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But I get it.
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This sounds like communism.
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I know that.
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But the thing is it's the other one that's
communism.
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It's the other one that's communism.
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Make money for a living.
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Work for a living.
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This is cool to work for a living.
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It actually is fun and you have customers
and they want what you have and you sell it
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to them for a profit.
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So you take how much does it cost you to make
the thing, you add something to that and then
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sell the thing to someone else and you end
up with more that you started with.
[583]
It's just genius.
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