The Revolution Already Happened, Senator
How traditional capitalism made itself obsolete
When I hear Bernie Sanders calling for a political revolution, I can’t help but think that the revolution has already happened, at least in a practical sense. It’s merely U.S. political structures that are lagging behind.
Arguably, the most powerful force of the past 400-or-so years of civilization has been the ideologies of capitalism and the collection of wealth and property. Entire nations are judged on such qualities. Social structures are based on such qualities.
Until recently, the means by which capitalism wielded power was through restrictive supply and demand. If you controlled a supply of widgets and a demand existed for widgets, you could do well for yourself in the transactions of widgets. So restricted to the very few has been the control of widgets that wars have been fought over them.
But that is no longer the world we live in. Our widgets have already begun to shift from hardware to software.
Net neutrality ensures that nearly everyone connected to the Internet is on the same level playing field. Billions of people all have the same ability to generate supplies of widgets. And by flattening the hierarchy of control, by removing the restrictions of who has access to control, traditional capitalism has been set on an irreversible path to obsolescence.
There were a few key events that allowed this revolution to quietly slip in the door, without anyone really noticing.
Forty-seven years ago, ARPANET — the computer network that would eventually become the Internet — was launched to create a redundancy of vital data. If a nuke took out one center, the data that was stored at that center would have been duplicated in other centers and there would be no loss of data. So a nuke takes out Boston; no problem, our Boston data is backed up in San Francisco, London, wherever. (Sorry, Boston.)
This strategy is called decentralization. It is the foundation upon which the entire infrastructure of the Internet is built. It is very important that everyone understand this. The Internet is a system for decentralizing data — and whatever that data represents: communications, transactions, knowledge.
Through the 1970s and 1980s, that original network expanded substantially. Its sole use was no longer defence. It spread into applications for research and education — the sharing of scholarly information. And eventually, in November of 1989, the first Internet Service Provider made the Internet available to the public.
Five years later, a web browser called Netscape Navigator introduced a secure method of communicating over the Internet — HTTPS — enabling the relatively safe transfer of credit card information. This was the trigger of the economic revolution.
While the dot-com boom was spurred by the commercialization created by HTTPS, applications were limited by the low bandwidth of dial-up connections. High-speed Internet was employed almost exclusively by government, universities and tech companies.
The popularity of the MP3 file format in the late 1990s was a direct result of this limited bandwidth. These highly-compressed digital audio files could be downloaded in minutes. Then along came Napster.
Launched in 1999, Napster made it easy for even computer-illiterate users to access MP3 files on other users’ computers, a form of communication (peer-to-peer networking) served by the Internet’s decentralized structure.
The music industry generates the majority of its profits from the sale of single music tracks. Napster’s very existence endangered that source of revenue. A single computer program put the future of an entire billion-dollar industry at risk.
Napster was eventually shut down by a court order. Ironically, while the audio files to which it gave its users access were decentralized, the index of which users had which files was centralized within Napster, making the company liable for the copyright laws its users were violating.
The music industry won the battle but lost the war. Other peer-to-peer applications took Napster’s place, decentralizing their processes further and forcing the music industry to enter the digital marketplace with a metaphorical gun pointed at its head.
Having had their first success in a long time with the iPod (a device for playing MP3 files), Apple opened its iTunes Music Store in 2003 and courted the weary record labels for distribution rights to the properties they controlled. The music industry didn’t really have a choice — they could get into bed with Apple and survive the existential threat of file-sharing or they could keep struggling to fend off their inevitable demise through costly litigation.
Prior to Napster, a single music track on vinyl or cassette would retail for around $2.50. In the iTunes Store, they began retailing for $0.99, with 30% of that going to Apple and the remaining 70% going to the artist and/or record label. Obviously, some of the price point reduction can be attributed to the lack of physical production and shipping costs. But ultimately, this was a coup.
Apple recognized how the decentralization of the Internet had undermined the traditional model of supply and demand in this industry and pounced on them when they were most desperate. In so doing, they cut out every other middle man — HMV, Tower Records, et al. Because what the consumer is paying for is not the product, but rather the easiest access to the product. Napster had revealed that the product itself is no longer the primary selling feature.
(Five years after opening, the iTunes Store had become the largest music vendor in the U.S. Two years later, the largest in the world.)
In March 2000, shortly before the dot-com bubble burst, I attended the film market of the first annual Yahoo Internet Life Online Film Festival at The Standard Hotel in Hollywood. A film market is an event at which buyers and sellers of film products network and negotiate possible sales. Based on the number of business cards I was handed, there were at least 30 online video startups present at the market. But like most dot-coms of that era, they were panning for gold where there was only fool’s gold. Within two years, those business cards were obsolete.
It was clear that the Internet was not ready for the hopes and dreams that had been attached to it. Not when it regularly took a minute or more to fully load a webpage and online videos took an intermission every 30 seconds to buffer the next 30 seconds of the video file being loaded.
Enter high-speed Internet.
In 2000, 34% of adults in the U.S. connected to the Internet via dial-up whereas 3% connected via high-speed. Four years later, high-speed services such as cable and DSL had surpassed dial-up as the most widely used form of Internet connection. By 2013, 70% of adults in the U.S. connected to the Internet via high-speed while only 2% connected via dial-up.
This shift put the final nail in the coffin of traditional capitalism. The spread of high-speed Internet accelerated as cable and telecom providers recognized how much more profit they could generate — with little additional overhead — by bundling high-speed access with services they already provided to consumers.
With this surge of high-speed connectivity also came a design movement called Web 2.0, which focused upon ease-of-use, greater interactivity and platforms which placed content creation in the hands of users. Web designers could now implement the bells and whistles they had to previously forego in consideration of the limited bandwidth of dial-up connections. (This website you’re reading is a product of Web 2.0.)
It is no coincidence that YouTube, the leading aggregator of web videos, launched in 2005. YouTube placed a tremendous amount of focus on ease-of-use and grew a massive user base through interactivity. The value of YouTube was wholly created by the users who uploaded videos to the platform. It set the standard for much of the Internet as we know it today.
Where Napster had undermined an entire industry by providing free access to the profit-generating properties controlled by that industry, YouTube undermined an entire industry by saturating the marketplace with properties that were never designed to turn a profit. Between 400 and 500 hours of video are now uploaded to YouTube every minute. Every minute! By comparison, the entire 6-year run of the TV show LOST was 90 hours (and cost many millions of dollars to produce.)
For a key movie-going demographic (teenagers), a night out at the movies that put revenue into the economy could be replaced by a night at home watching, sharing and commenting on YouTube videos that put little to no revenue into the economy.
Consider the effect: movie studios have been forced to create less movies with bigger budgets, with flashier special effects, in 3D, in which the fate of entire planets hang in the balance. Mid-budget movies, once a mainstay of theatrical distribution, are now fewer and farther between. Many of those stories are now told in TV shows. (The Golden Age of Television that critics, theorists and marketing departments celebrated in the 2000s was nothing more than a side effect of the Internet’s growing impact on the movie industry.)
Like the music industry before it, the movie industry has a metaphorical gun to its head. They have no choice but to bring out all the flashy lights, operatic stories, shock value and nostalgia faucets to grab our attention, to make the experience of movie-going more exclusive and engaging than viewing a video of a rat dragging a piece of pizza down some steps or getting into a flame war on Twitter with someone you’ll never have the displeasure of meeting in real life. They are in competition for our eyeballs and their competitors have no overhead, no physical production costs, no distribution costs, no legal fees, no deals to negotiate and no celebrity egos to placate. The movie industry can no longer produce films; they must produce experiences.
Napster and YouTube are but two examples of what pundits call disruptive technologies. But disruptive is merely a catchword to make them sound innocuous. They are revolutionary technologies. They undermine the traditional systems of an industry and either replace or transform them with new systems.
And these digital revolutions are everywhere — eBay in the retail industry, PayPal in the financial industry, AirBnB in the hotel industry, Uber in the taxi industry, Skype in the telecom industry, Instagram and Flickr in the photography industry, Spotify in the radio industry, Fiverr in the temp agency industry, Craig’s List in the classifieds industry, Kickstarter in the investing industry, Wikipedia in the research industry. Facebook hit two birds with one stone in the news and marketing industries.
Consider the effects of these platforms. Each has automated manual processes, destabilized existing systems and begun putting traditionally-modelled businesses out of business. This is not disruption. This is revolution.
All of these new systems are built upon the decentralized structure of the Internet. For the most part, they employ decentralized production models — their users generate the value of the platforms by creating platform content themselves. And with very few exceptions, their profit models are also decentralized. They generate a very small amount of revenue on each transaction, but in aggregate, those few pennies add up to billions of dollars. Apple, Alphabet (Google), Microsoft and Facebook are currently the four most valuable companies on the Fortune 500 with a combined value of approximately $1.8 trillion (USD).
Globalization protects the corporate body — when revenues drop, corporations cut costs by, among other things, moving their operations to a country where $2 buys the same amount of labor that $200 buys in the U.S.
What the Internet has provided is the option to nearly eliminate the need for salaried workers and their benefits altogether by redistributing labor and employing automated systems. This makes perfect sense if your primary goal is to sustain your business. But those who are left in the wake — workers, employees, craftspeople — often have no protection; the loss in revenues gets passed on to them.
As more industries become digitized and more revolutionary platforms arise, the capitalist economies that breed them will themselves become more decentralized. So long as net neutrality is maintained, revolutionary platforms will in essence decentralize and flatten those economies as a whole. And a decentralized, flat economy is a socialist model. However, this isn’t a Marxist application of social organization. It’s not a stepping stone to communism, but rather a form of democratic socialism that allows for — and indeed propels — the exploits of capitalism.
To protect those whose are existentially affected by the chaotic whims of the digital revolution (and that’s pretty much all of us), politics needs to catch up.
The Internet has put a metaphorical gun to all of our heads. The processes by which wealth is built have already been redistributed. A democratic socialist form of government — a New New Deal — is the only antidote to the effects of this new economy into which the U.S. has led the world.
Now we are all the music industry undermined by Napster. We are all the movie industry undermined by YouTube. We can either adjust our political structures to complement this transformation and survive the existential threat or keep struggling to fend off an inevitable and regressive descent into feudalism.
You either ride the horse in the direction it’s going, or you fall off the horse.
In the past 20 years, 3.4 billion people have connected to the Internet. It has affected more people more quickly than any religion, any war, any previous technological breakthrough. No other systemic transformation has occurred so quickly in the history of our species. There are 4 billion people who have yet to connect to the Internet. As they do connect, the effects of decentralization will be exacerbated.
The only variable is how long U.S. citizens will procrastinate what they must inevitably do: to revolutionize their social safety net as their traditional economic structure crumbles under the digital steamroller.
The clock is ticking. 2016, 2020, 2024…
Thanks to Sara O’Connor, my editor on this piece.