The Truth About Capitalism, Cryptocurrencies and Data as a Human Right

An interview with Gunther Sonnenfeld, co-Founder of Novena Capital + Next Block Group
Changemakers 2019, Issue 1 — Hosted by Jon Samsel

I recently engaged in a series of phone and email conversations with Gunther Sonnenfeld to explore his thoughts on capitalism, cryptocurrencies and the future of data rights. Gunther is an award-winning technologist and global strategist, and current Founding Partner at Novena Capital and Next Block Group. Novena provides sustained growth strategies and strategic solutions using blockchain + DLT technologies for later stage startups and mid- to large-tier enterprise clients. Next Block Group is Novena’s investment platform matching enterprises with leading-edge crypto protocols to create new revenue opportunities; its emerging protocol database is a dynamic repository of 85+ companies that are disrupting entire industries, and includes a unique vetting process to accelerate smart, scalable joint-ventures into the market.

Here is the transcript of our conversation.

J: Tell me about surveillance capitalism.

G: Well, the term is an oxymoron, isn’t it? Let’s address the mechanics of capitalism for a brief moment. If we go all the way back to the East India Company which was founded in 1874, you can see surveillance at play in the earliest days of capitalistic endeavors. Then leap slightly forward to the Banana Republic model, which was explored in detail by Lt. Smedley Butler’s book, War Is A Racket. Butler writes about how he and other high-ranking military folk were private mercenaries paid for by investment banks to go and fight wars, install dictatorships, surveil (counter)insurgency groups, seize natural resources and then bank those resources. This surveillance model has permeated over time — keeping a close watch on the people, places and property special interests wish to influence for some type of business benefit. John Perkin’s seminal book, Confessions of an Economic Hitman, also covers these constructs in alarming detail.

People living in capitalistic societies don’t realize that privacy is all but dead.

J: So what you’re saying is that heart of capitalism is control?

G: Absolutely. And it’s manifested in things like data mining, and what used to be privacy. People living in capitalistic societies don’t realize that privacy is all but dead, which is sad. Coinciding with that is the importance of data sovereignty. So what you are seeing with new groups like Promether and Hu-manity and a bunch of others is a real effort to take back data for citizens — and also declare it as a fundamental human right, which it should be.

For example, when you look at different data through IoT, consumers are giving off all kinds of sensory data. A lot of this data is captured on your phone — which is why you may receive seemingly endless, automated robocalls based on your trace history — and companies know when you’re on your cell phone, they know where you are, what you’re searching for and what is near you. We are all being surveilled to a great degree.

Things we first saw in Minority Report are coming true.

What’s happening now is people are starting to realize through the thousands of data breach events around the world is that surveillance capitalism is intruding on their lives. Every person that has a social security number, EIN, or any form of registry number with the government is being profiled in a central database. Predictive analysis is happening right now. Things we first saw in Minority Report are coming true. Imagine command centers of different data types: Semi-structured (closed loop data, often transactional), structured data (such as third-party cookies) and unstructured data (data found in social media threads, for example). These data types are the primary way that people are surveilled. And it’s big business for the FAGMAs and they are not going to stop collecting, sharing and selling this data unless they are forced to do so. Amazon’s foray into surveillance happened with a $600 million contract with the CIA, and it’s grown from there. Amazon has the most lobbying power of any company in the world — with no less than 24 constituency groups lobbying on their behalf. This means that they are inextricably linked to the surveillance-intelligence apparatus. When you combine Amazon with the other big tech players like Google and Facebook, you see before you the largest surveillance entity in the world.

People are facing a huge threat to their consumer rights and many don’t even realize it. They don’t really understand the mechanics around how data is collected, stored and used. For example, data seized from surveillance activities within the Internet economy — without people’s knowledge or permission, for the most part — is highly stratified and centralized whereby profits float to the top for select shareholders. That’s the way it works, and it’s been this way for some time.

J: Tell me more about companies like Promether and Hu-manity — what’s their mission?

G: They are building alternative infrastructures, data storage capabilities and self-management of human data. Hu-manity believes data is a human right. This is a big deal. The leadership team is telling businesses that going forward, it’s going to be far more lucrative for them (and a better experience for your users) if people are allowed to self-manage their data. Promether is creating an alternative to surveillance — to the surveillance thread in data storage and in data management.

When Google creates surveys and special interest studies, it uses a method called market batch analysis. Since it has a semantic web-based system, it collects large amounts of data. The result is that when you query and view your results on Google, it actually indexes as a new page. Ironically, the Google algorithm gets progressively worse and worse over time and it has to spin it off into custom algorithms — and that’s why it personalizes feeds. Google is attempting to give you one answer, the “best” answer that THEY want to give you. What most users really want are different answers that are contextually relevant to their query.

With Google and Amazon, users don’t really participate in the economic model (with YouTube being the exception, to some extent, although that has changed through blatant censorship of ‘alternative’ content providers). Sure, they might pay someone $5 to contribute to a survey, but this is nothing — it’s not a data revenue sharing model. If you’re a FAGMA enterprise client, they’re taking 30% or more of the revenue share off of what you’re doing through their infrastructure. If you are a SaaS business where your margins can be very thin, that 30% which goes to the infrastructure supplier is very costly. When it comes to data storage, you have a new crop of businesses challenging the incumbents. Amazon has a quasi-blockchain database called QLDB. It’s a refined offering that may give user advanced capabilities, but it doesn’t give you greater data sovereignty.

Facebook’s attitude has been, if we’re giving you free product, you are the product.

Facebook has arbitraged its user data so it can earn as much money as possible from it. Until recently, Facebook users had little understanding of how their data was being shared and monetized. Facebook’s attitude has been, if we’re giving you free product, you are the product. That rationale doesn’t fly anymore because it has a huge impact on society. When Facebook performs “attention engineering” whereby they hire full stack developers to game and leverage click behavior, you really start to see the ethical ramifications.

J: Will the impending billion dollar plus FTC fines against Facebook cause it to reconsider the way it conducts business?

G: I don’t think it will change much internally for Facebook. Like other mainnet companies, it is under heavy shareholder scrutiny and guided special interests.

J: Microsoft recently announced their Edge mobile browser working in conjunction with NewsGuard — a service that will help users discern real news from trusted websites versus fake news. What’s your take on this?

G: It’s a bunch of bullshit. What is fake news? A factum, assertion, or speculation about what’s going on in the world? Is a privatized resource pool better for the masses? Is it more real because Microsoft says so?

Let’s look at content for a moment. The predominant Internet model for creation is non-source verified and the economics around online interaction are arranged primarily around clicks and impressions, with subscription models and very few data revenue sharing models peppered in. The economics don’t work out because so much data isn’t classifiable or controllable or able to be sourced. The second part is that there are a few new formats being introduced into the mix — and this is a conversation I am having with different groups around the I.P. that we’ve developed. Basically, you have a contextual format that can be leveraged in many ways.

What Microsoft is really saying is that we will streamline information for you, and personalize it, thereby reaffirming your own belief systems (or theirs). It’s an information problem at its core. It’s confirmation bias on steroids, masquerading as high-quality, contextualized information.

J: Are all five players in the FAGMA beast essentially the same?

G: There are nuances in their business models but they are all interconnected at the hip. They know that the writing is on the wall for putting together a new Internet infrastructure and they will do anything they can do to stop it because it’s not in their best interests right now. The good news is they don’t really have a choice. A lot of people are gunning for them, including people inside Silicon Valley.

I think it’s pretty clear at this point that Twitter isn’t what it used to be.

J: What about Twitter, and all the ruckus concerning Jack Dorsey?

G: I think it’s pretty clear at this point that Twitter isn’t what it used to be — and is part of the apparatus to stifle free speech, despite all proselytizations to the contrary. Dorsey hasn’t said anything of any substance, and it’s rather strange that a company of that size and market cap can’t come up with product solutions for what is an obvious problem with information. Then again, he’s got about $4.5B in the bank, so maybe he’s just going through the motions of being a puppet CEO. Add to this the fact that Twitter and other big Internet companies consulted with the George Soros-backed Media Matters on a bonafide censorship initiative to subvert Trump’s presidency and throw the 2020 election, called Democracy Matters: Strategic Plan for Action. Like Trump or hate him, there is nothing about this that is democratic, or reflective of a free society. So, count Dorsey in with all the other rich minions who have sold out their fellow citizens to special interests.

J: Besides the FAGMA-5, are there any outlier companies doing innovative things that you feel have disruptive potential?

G: HTC’s cold wallet storage offering is interesting. They identified 30 million active crypto users around the world and had the foresight to say, if we can supply a wallet storage solution for them to hold basic things like Bitcoin, Ethereum or Litecoin, we can capture some of that base of users and then expand on market possibilities. That’s a smart play. Now is this a truly decentralized solution? No. Is private key encryption all that different from 2-factor authentication like what Apple does? Not really. The reality is, private keys only go so far if you are on a centralized network or a highly centralized Internet infrastructure. If HTC were to develop a distributed mesh network, which is truly decentralized, with nodal configurations that can exist offline, that would be a different story. They might be open to that, and already considering that. Mobile companies with significant market share and active user bases are looking for a way to gain a competitive advantage. That competitive desire is good for the market because it catalyzes innovation. Although innovation can also head down a nefarious path with mobile disruption.

One negative example of mobile disruption is China’s social credit system, which performs ‘thought surveillance’ on its citizens. It’s a totalitarian use of data. The realities behind the scenes are frightening. This WSJ piece from a couple years back really shows you what’s possible when governments use citizen data against citizens. If people think this can’t happen in western societies, they are deluding themselves.

Source: WSJ —

J: Let’s travel 25 years into the future. Will the average person own their personal data — or be slaves to it?

G: I see a split. I think there are plenty of people in the world who are happy to buy into the comfort and ease of their devices and are willing to give up their sovereign rights to data, including free speech. They don’t want to have to think about the responsibility. Just as many people won’t do this. They will choose to participate in decentralized networks and microeconomies. By a microeconomy, I mean an ecosystem of products and services that are affixed to real assets in the real world. Those assets will have accruable value. Crypto, as one example, can reflect that value in terms of payment and value exchange — and I think we’re going to see a lot of that.

Imagine a diverse, polycultural landscape of microeconomies on one hand, and on the other side you’ll see automated, centralized structures where people have chips implanted under their skin.

Imagine a diverse, polycultural landscape of microeconomies on one hand, and on the other side you’ll see automated, centralized structures where people have chips implanted under their skin and they will think it’s cool that they can process information or answer questions faster — or whatever notions they have about what it means to be intelligent. A culture of cyborgs will develop on this other side. Kinda scary, and actually idiotic, if you ask me.

J: What about governments and citizenship?

G: Surprisingly, many in power today already believe there will be a collapse of governments as we know them. More local and regional constructs will result that are more individualized, compartmentalized, free-standing systems. Liquid democratic systems will emerge with certain technological advances and they will merge with free market systems of microeconomies — with new types of assets and infrastructure. What do I mean by that exactly? I’m talking about new agricultural systems. I’m talking about new energy systems. Even new materials. There are companies today that are creating raw materials through biogenetics. The impacts are huge because then you don’t have to import from other locations, you can reduce your footprint, you can reinvigorate local supply chains. All these moves, in aggregate, are going to lead to more local and regionally run “states” that are more closely managed by the people. People are not responsible enough yet to self govern, but things are steadily moving this direction, as evidenced by the calamities we are witnessing in government right now.

J: How do you feel about the EU’s General Data Protection Regulation?

G: GDPR, while seemingly well-intended, is patchwork legislation driven by neoliberal biases. Lawmakers don’t know where things are going. For example, in the near future, Internet protocols will radically change, making many aspects of GDPR moot — or simply unenforceable. GDPR can also be a mechanism for censorship; imagine “erasure” requests extending to truthful information that has been lawfully published by small authors and editors. Large corporations and the big publishers may have the internal mechanisms in place to comply with GDPR law, but individual blogs who have their content syndicated across the web do not. There are no incentives in place for the large publishing powerhouses to stand by the authors to keep their material online, so the result may be a drastic chilling effect for free expression and privacy.

J: Tell me more about the companies you co-founded, Novena Capital and Next Block Group.
G: Novena is an investment advisory group. We kind of operate like a boutique investment bank, but not exactly. We advise companies that have operating capital or are earning revenue that are trying to do big things with social and environmental impact. This includes new Internet infrastructure, alternatives to surveillance and data systems and the like. We work with a host of companies on getting them positioned for market and integrated scale. We also developed an investment platform called Next Block Group, which is a platform that focuses on the relationship between developed decentralized base layer protocols and enterprises. Essentially what we have done there is build a platform of 85 leading-edge protocols, 20 of which our group helped raised capital for through ICOs and private sales. These are groups involved with various industries around the world. Our model is to match them up with like enterprises looking to learn and transform their own operations. Insurance companies, healthcare companies, financial companies, ecology-focused companies — all great companies doing great things. In aggregate, these protocol companies have raised about $2.3 billion in operating capital. Unlike being in an early-stage funnel, we’re involved with groups that are in operation and wanting to work with other companies that already have a business footprint. Together, they can more easily disrupt and transform society.

J: You mentioned you’re involved with Holochain. In what way?

G: Yes, more details will be coming soon. I’ve known this group for about 8 or 9 years. They’ve developed a framework for distributed apps with a ledgering system, with user autonomy built directly into its architecture and protocols, and it all works like an operating system. They started in metacurrency design and they’ve taken their real world experiments and applied their learning into a new kind of Internet economy. Essentially, they expanded upon theories and practices of famed financial justice warriors, such as Bernard Lietaer, who was a central banker earlier in his career, before he co-architected the Euro, and was involved in over 196 complementary currency experiments around the world. Holochain can be embedded in a hardware stage device like a server, which they refer to as a holoport. That operates like a distributed mesh network — so it’s truly decentralized. For protocols this is fantastic because you now have a decentralized infrastructure, so if we’re working for say, an insurance company, they can integrate their protocols into that ecosystem and we can go provide a unique type of solution for the sector that helps a lot more people who need different types of affordable insurance support. It’s a really powerful solution.

The most radical innovation is happening around this new decentralized Internet infrastructure.

The most radical innovation is happening around this new decentralized Internet infrastructure. Not in W3C protocols. Not on HTTPS. Not using DNS entries. Not under the thumb off the telcos and corporate throttling. None of that stuff. When it comes to the crypto space, I think we’ve only begun to scratch the surface. There is healthy debate happening around different economic models. The funny thing about crypto is that a lot of it is driven by ideology; the post-Keynesians, the Austrian Schoolers, the voluntarists, etc. They have different belief systems, which is totally fine, but endless debates around the semantics of “what blockchain is,” for example, is not lending to more productive outcomes. But that is also changing rapidly.

Innovation is also happening around next-gen protocols that people don’t talk about very much, such as SHA-3 (keccak). With the SHA-3 protocol, for example, you can implement mining attributions such as Proof of Work and Proof of Stake simultaneously, which have always been thought of as competing approaches. This will radically change the mechanics of mining and crypto distribution. More importantly, with alternative asset development, it’s going to make a huge difference, while big institutions fight to hold their ground. JP Morgan is issuing its own so-called cryptocurrency. What it is essentially offering is a crypto fiat vehicle — not really a cryptocurrency. What it is really assembling is a liquidation mechanism for its debt assets. It’s not decentralized, but that’s okay. It will probably be successful because JPM, like other big banks and institutions, need an alternative to the current derivative debt vehicles. We’re in a major credit bubble already and we will likely see a credit fallout come Q2 of 2020. Unlike 2008 when institutions could just issue more debt on top of the stack, this credit stack will likely crumble all the way down the consumption funnel. This credit crunch will fuel the need for alternative debt vehicles, but really, more asset vehicles through which people can invest for the longer haul as they navigate the upcoming crash.

J: Any last words as we conclude our chat?

G: We are all trying to skate to where the puck is going, but there are various paths we can choose to take. We envisage multiple scenarios playing out simultaneously because that’s what’s actually happening in the world in which we live. There is no one way to do something — no “right” answers per se. We must go out there and put major skin in the game, take necessary risks and test our assumptions against reality. As we like to say within our group, “We’re not changing the world, the world is already changing. We just want to be on the right side of history.”

Jon Samsel is an author and speaker, currently employed as the Head of Worldwide Marketing for Dropsuite Limited (ASX: DSE) a SaaS provider of backup, archiving and recovery solutions delivered at scale to power business defense.

Disclaimer: This interview is my own and are not the views of my employer.