Online Companies Like Facebook Have Created a Meaningless Economy, says Douglas Rushkoff

Online businesses were originally measured by how much they sold. Makes sense, right? That's how economics is taught. But today, the largest online companies depend on an "economy of likes" to make money, says media theorist Douglas Rushkoff. Valuations for companies like Facebook depend largely on their user base, he says, rather than their actual profits. An interesting case in point is Jay-Z's partnership with Samsung.
When the technology company gave away one million copies of the rapper's album Magna Carta Holy Grail on users' phones, paying Jay-Z $5 million, they weren't really purchasing his music — they were purchasing this fan base (and installing spyware on their phones via the album download). The attraction of this business model to investors is that the ability to measure consumer behavior directly, via spyware or "likes," is meant to replace traditional modes of advertising. But when everyone is an advertising company, asks Rushkoff, what happens to the real economy?
Indeed companies who are extracting huge profits from society without giving us something tangible in return, like razorblades or bananas, are harming the real economy. Business should benefit society directly, not indirectly, as when billionaires donate their absurd wealth to our schools. That's a robber baron society. We just want a society.
Rushkoff's latest book is "Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity":
Read more at BigThink.com:
Follow Big Think here:
YouTube:
Facebook:
Twitter:
Transcript - In the original .com era companies were measured by how much money they made. The idea was that you sold a lot of stuff and took in a lot of cash and that was the way you could get a valuation and then get acquired or do an IPO. Now, consumers don't have money anymore. People are poor. So companies can't really use revenue as a way of showing what they're worth, plus they have no real business plans. So what they do instead is use likes as a metric of their worth. If a company can have a lot of people saying I'd like it, I like it, I like it, then that more ethereal abstract metric, I've got a million likes; I've got 20 million likes, that becomes marketable. So if I want to sell a record and make money and go to a record company or a CD company, I can show look, my song on YouTube has 500,000 likes and the record company or the sponsor will then promote my music, not even because they're going to make money with that music but because then I'm supposed to sell my likes, my views, my followers to their sponsors.
So, a guy like Jay Z comes out with an album through Samsung that he gives away for free because what it really did was installed spyware on people's android phones that could see what they were doing. So what Jay Z was doing was rather than selling his music he was selling his likes. A company like Tumblr had no revenue but they had lots of likes and users who all clicked on each other stuff, they had those phantom metrics. And with that they were able to sell themselves for a billion dollars. This year Yahoo is taking Tumblr, the billion dollars, as a loss. They're writing the whole thing off because they didn't buy a company, they bought likes. But this is the new economy that we're in. It's an abstracted absurd essentially meaningless economy. Read Full Transcript Here: