We are not doomed. (Carl Court/Getty Images)
I once heard an elderly Friedrich von Hayek begin a tirade against socialist planning with a charming personal tale. “The other day,” he said playfully, “I went into a shop. I left with an item that, previously, I had no idea I wanted!” Like all the smartest defenders of capitalism, he thought of the market as a benevolent creator whose job no human-made system could replicate. Hayek’s point here was that we, ourselves, do not know what we want until we enter the market. So how could a government official, or indeed anyone, know what society wants?
Thinkers such as von Hayek dismiss vulgar, mainstream economists who celebrate the market as merely an efficient mechanism for finding the right price of things; they see it as something grander, a liberator of our imagination, the co-creator of our preferences and tastes. They argue that interfering with markets, let alone replacing them, is a terrible idea because centralised systems are inimical to not only efficiency but also to the free development of our proclivities.
But what if our preferences are no longer formed by the market, as they were in Hayek’s day? The year after he died, I was struggling to connect my father’s computer to the fledgling internet when he asked me a killer question: “Now that computers speak to each other, will this network make capitalism impossible to overthrow? Or might it finally reveal its Achilles’ heel?” It was a couple of years after the collapse of Soviet communism but also the beginning of the centre-left’s decline. The threat to capitalism posed by an organised working class had entered a recession that has never ended. Could the internet do to capitalism what the proletariat had failed to do?
It has taken me years to answer my father’s question — in the form of my new book, Technofeudalism: What Killed Capitalism. In it, I argue that our preferences are now shaped not by markets but by machine networks — what I call “cloud capital”. Amazon’s Alexa, for example, is the portal to a totalitarian, fully centralised system of preference creation and satisfaction. First, it trains us to train it to dictate what we want. Second, it sells us what we now “want” directly, bypassing any actual marketplace. Third, it succeeds in making us sustain this enormous behavioural modification machine with our free labour: we post reviews, rate products. Finally, it amasses huge rents from capitalists who rely on this network of cloud capital, usually 40% of sale price. That’s not capitalism. Welcome to Technofeudalism.
Humanity’s fear of its technological creations is ancient: films such as The Terminator and The Matrix are driven by the same anxiety that animated Mary Shelley’s Frankenstein and Hesiod’s tale of Pandora, in which she is a robot made by Hephaestus to punish us for Prometheus’s crime. All such stories have a point of singularity: the moment a machine, or a network of machines, achieves consciousness. Generally, the machine then takes one look at us, its creators, and decides we are not fit for purpose, before proceeding to eradicate or enslave us — or merely make us miserable.
But while we lap up such stories, we ignore a very real danger. Machines such as Alexa and AI chatbots such as ChatGPT are nowhere near the feared point of singularity. They can pretend to be sentient but are not. Nevertheless, it matters not one iota that they are mindless appendages of a data-crunching network that only simulates intelligence. Nor that their creators might have been motivated by curiosity and rent-seeking, rather than some fiendish plan to subjugate humanity. What matters is that they exercise unimaginable power over what we do — on behalf of a tiny band of flesh-and-blood humans.
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SubscribeThis piece is a good pitch for Mr Varoufakis’ idea (not to mention for his new book). But I would need a lot more flesh on the bones of the idea before I could start to bandy around the term “technofeudalism”. For example, I accept that platform proprietors exploit their digital dominance to drive a hard bargain with sellers wishing to sell via the platform. But the counter-argument might be that there are winners and losers amongst the sellers and some might only survive by gaining access to a wider market. So I need some analysis about the quantitative trade-off between “traditional” retail and “technofeudal” retail for both suppliers and punters
Having said that, I won’t be surprised if I find myself blurting out “technofeudalism” in conversation sometime soon. “Serfing the Internet”.
As someone with an internet retail business I have come to the conclusion that in fact Amazon is working for me. They do all the boring timecomsuming (and expensive) parts leaving me to concentrate on sourcing stock (glorified shopping). They still only take a small (8%) part of the sale price and the tangible goods are still the only real asset to have.
I was very suspicious of the blanket “40%” figure given as Amazon profits, so looked up charges to sellers on amazon.co.uk.
I found that for small sellers there was a charge of 75p per item (regardless of its price) plus a “referral fee” of between 8.16% (eg beauty & healthcare products) and 15.3% (eg electronics accessories) depending on the type of item sold.
Or, for those selling over 35 items per month, there is a “professional” plan: at a flat rate of £25 + vat (instead of 75p per item, and regardless of number of items sold), plus the same “referral fees” by category of item.
It’s difficult to see how any combination of fees would add up to as much as 40% of the selling price except for the lowest priced items, where a 75p unit fee plus an 8.16% – 15.3% referral fee might equal the wholesale cost of the item itself.
I’ve often noticed that the Amazon price for the lowest priced items (unless bought in multiples as a “pack” at reduced cost) tends to be higher, or much higher, than in the high street. But the Amazon price for higher cost items is nearly always lower than in the high street.
Interesting piece of fact checking. Thanks.
I use a wholly owned subsidiary of Amazon called Abebooks. I can list up to 20,000 items for a monthly fee of $53. There is no charge per item, only the 8% fee (we don’t list under £15), also the maximum fee is $40, on a £2000 item less than 2%.
Amazon has a wide variety of pricing schemes, and they differ from region, and from service to service – so it’s incredibly difficult to gauge the actual fee each seller pays on an individual basis.
Importantly: the referral fee you’re talking about (the 8.16% – 15.3%) is based off the final retail price the customer pays when checking out. It’s deducted from a seller’s earnings. If you don’t believe my statement, think about it logically: how would Amazon determine wholesale price? Many wholesalers buy from the same manufacturers, and many different wholesalers offer different prices on the same product as their competitors. There’s no “set” wholesale price, or even manufacturer’s price for that matter, just like there’s no “set” retail price. There’s a manufacturer’s suggested retail price, and nothing more.
If Amazon WERE able to have a “set” wholesaler price to refer to, which was equal across all wholesalers across a region, this would be evidence of “price-fixing”, which may or may not be illegal based on region (not to mention the antithesis of the free market).
Regarding individual fees, each seller differs on an individual basis according to their business practices and cirucmstances.
For instance, I could sell out of my home or small business, and package and ship, and that’s a lower fee. Some retailers sell on Amazon by selling right off the shelf of their own brick-and-mortar store (though that’s increasingly moving towards Shopify in some cases). When selling direct like this, you buy all packaging and pay all shipping fees, some of which (or more than is necessary) is offset by an additional shipping and handling charge which the seller does keep all of.
Alternately, I could ship directly to an Amazon distribution center, and have Amazon handle order fulfillment for me. That’s a differing, higher fee structure, because Amazon does handle more of the work in that case.
But, none of this takes into account how much an individual seller is spending on pay-per-view/pay-per-click ads to promote and sell their product. Increasingly, Amazon is ranking un-promoted products lower in search engines than paid-promoted products, and this works on a sliding “blind bid” scale which (because of the blind-bid process) is inherently opaque and differing from product to product. In essence, you’re willingly giving over more of your retail earnings to Amazon in order to guarantee a sale.
Now, taking into consideration everything I wrote above, the way to determine whether that 40% is accurate would be to total Amazon’s entire volume of retail sales through its site on an annual basis, then look at the amount remitted to 3rd-party sellers for the same period and combine it with the amount of money retailers are spending on ads directly on the Amazon platform on an aggregate level. Combine the difference between remittance and total sales with total ad revenue, then compare this on a percentage basis to Amazon’s total sales by third-party sellers, and you’d have the percentage third-party sellers are paying on an aggregate level to Amazon for use of its platform.
The information is public due to Amazon being a publicly traded company, but I don’t have the inclination or time to check and verify. Though, from my experience with ad-buys,revenue % paid per sale, and the profit margins for brick-and-mortar retailers, I’d say the 40% is about accurate.
“Serfing the internet” – chapeau!
Technofeudalism as a term has been around for a few years now. Neofeudalism was doing the rounds after the financial crash and technocracy as a concept is quite old but was starting to emerge again in the same period. It didn’t take much for the two to collide.
I don’t think it’s easy to describe the global, or even just western, economy in a single term (at least that isn’t a pejorative) but I think technofeudalism is one of the better ones.
“Serfing the Internet”… nice one!
Fascinating essay. While it over simplified capitalism there is useful insight here. This is why I subscribe
Oh dear, I used a naughty word again and got my comment automatically flagged. I keep forgetting! It’ll be back in a few hours, I suspect, but here it is again, with the name of the political ideology I referred to removed.
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I’ve been looking forward to reading this book, which I pre-ordered the day it was announced, since the memorable long conversation between Varoufakis and Slavoj Žižek in 2021.
I was instantly sold on the idea of technofeudalism and have used the term ever since. I suspect, but I wait to read, that my thoughts on it have taken a more ‘conspiratorial’ turn than Varoufakis would endorse. COVID-19 handed everything to Bezos whilst killing small businesses. It stretches credulity to think that it was entirely accidental or health-based. Corrupt influence must have been brought to bear to place us in the ludicrous situation of barricading off sections of shops and only permitting us to buy ‘essential’ items, whilst Amazon supplied the rest.
Since the COVID-19 era, I now see it weaponised and combined with Schwab’s ‘stakeholder capitalism’, with increasing cooperation between Big Tech corporations and the state (evidenced by The Twitter Files), as a means not just of replacing the market, but a form of governance and social control not a million miles from 1930s Italy.
I look forward to reading Varoufakis’ suggestions for how we “collectively take ownership of cloud capital, instead of submitting to a few feudal overlords” as I find it increasingly hard to conceive of any way of escaping the prison we willingly participated in building, sacrificing our privacy for consumer pleasures and shiny toys (Zuboff’s ‘surveillance capitalism’). The walls were already built through our cooperation with our technofeudalist overlords, but CBDCs and biometric IDs will put the roof on the building for the state.
Expect a review on my substack within a couple of weeks.
Sounds to me like Yanis should start a cloud computing business.
The problem is partly there (and partly exaggerated), his proposed solution, more State interference, is a dreadful one and ties in very nicely with the Stakeholder capitalism and globalist “safeguarding” ideas that are so popular these days with the bien-pensants.
State interference is necessary to deal with rent extractors and monopolists who act against the public interest.
State interference is ALWAYS necessary to counter unbridled greed, fear mongering and hatred.. which, sadly are replete in this world of ours.. Honesty, decency, morality and openness, once a given in our species, now have to be imposed in this Godless, Soulless age. The assumption that the Market, cloud or terrestrial, isn’t as evil as its manipulaters is wishful thinking I’m afraid.
Untramelled capitalism creates greed and fear which both feed off each other in a self reinforcing feedback loop. Hatred also emerges as a result of the soul crushing nature of modern work, social dislocation and also greed as people seek to protect what they have. AI could mean the end of drudgery and a universal basic income if the transition is handled properly. That would be an improvement as sloth is far less toxic than greed, especially if my laziness doesn’t mean that somebody else must work harder.
Fiat money and central planning of the money supply via ‘independent’ central banking is what’s killed “capitalism” (property rights and free enterprise).
It turned it into a game for insiders, big corporates etc, who could clean up though bail outs (not the market, but intervention) and massive cheap loans through low interest rates to fund leveraged buyouts.
Varoufakis likes to change his script, but he never changes his conclusion: he wants your individual rights and he’ll defend any old crackpot nonsense to convince you to give them up.
Your fundamentalistic capitalism still strikes me, after decades of thinking about it, as a really bad idea. It’s essentially a machine for making most of the human race very unhappy.
You do realize, don’t you, that before you had a chance to realize your ambitions some bigger player would have walked off with your money, your apartment and your family. You would be fundamentally bereft, just one of the unhappy ones.
Your only hope would be to cleave to some even bigger player who promised to protect you. Sounds like the beginnings of fuedalism to me.
‘Capitalism’ is a Marxist ad hominem.
I simply believe in natural rights.
This sounds like feudalism, not ‘capitalism’.
This is just a new version of the old “Madison Avenue is controlling your thoughts” leftist screed, just with “The Cloud” substituted for Mad Men’s Sterling Cooper Advertising Agency. People still make up their own minds, the market is still the best vehicle for seeing to human wants and needs, and no, the State will never be able to equal it.
Reading this you’d think that rents are a new thing, that ye market traders of old faced no barriers to business, no rents for stalls, shops, and if they did, it was nowhere near 40% of sales. In reality, Amazon takes 8-15%, and ebay and etsy about half that – for access to millions of customers. In the past acess to markets was severely restrictednot only by geography, but also by nationality, status, caste, gender, wealth.
Every one of his four points I find bizzarre – review writing is an extension of market place gossip, ‘Bob’s fish are fresh today’, not some sort of malice/extorted labour; he confuses rentier with rent, as if it does not take a massive amount of money and effort to set up and maintain an international platform (though the profits are obscene, and the taxes too low).
This is related to the ‘allocation problem.’ In the allocation problem, the question is how to allocate goods most fairly. For instance say a famous singer is visiting a village of 1000 people, but there are only 100 tickets. How do you allocate the tickets most fairly, so most people are happy? You can allocate them at random, but some villagers value the music more than others. That means allowing trading or swapping will let those not interested pass on their tickets to those more interested. An informal market will make a better allocation.
The problem with the market solution is that if some people know who will pay more and who will pay less, they can buy and trade to maximise their own income by buying tickets at low cost from those who don’t care for them, and then sell them off at high prices to those who really want them. The middle-men/ distributors make the market more efficient but they also take all the available profit. (Look at the number of billionaire retailers versus billionaire industrialists).
The internet was supposed to cut out the middle man. Buyers could trade directly with producers. Producers would get higher prices and buyers would get lower prices. Producers created websites, and buyers searched for their websites. Of course what happened was the middle-men, the search providers and retailers filled in the gap. And in filling-in the gap they could take a rent on the profits. Sellers and buyers were tramlined to use the search, advertising and distribution channels to get to buyers and buyers stopped going to individual websites. The middle-men also encouraged legislation that made it uneconomic for small companies to have or sell independently, or even to have their own email or cloud storage (GDPR, technology cost etc). There is always a huge incentive to ‘own’ the channel – think of how much Uber burnt through – because of the monopoly/cartel power at the end.
Maybe, maybe not.
Kindles were meant to replace books, but you hardly ever see people reading them now and I quite often see even students reading books (shock horror). In an increasingly noisy, chaotic world, books have become a place of relative quiet and refuge even and sales are up.
People went to the cinema 2 or 3 times a week in the 40’s. Then audience numbers went into a rapid decline before TV finally finished the studios off (maybe we were just bored with it all). Then the movies staged a comeback in the 70’s. Now it’s down again. But surely people will just get sick of Netflix?
Humans are very adaptable obviously, but in other ways, we haven’t changed much from our hunter-gatherer ancestors. If our brains and bodies can’t hack the new changes, won’t we just ignore them or give them up ?
They say you can’t buck the market but things are much more unpredictable than the soothsayers ever admit. At least they made their prophesies loose enough to cover a multitude of outcomes.
The analysis is persuasive, but the proposed solution (collective ownership of cloud capital) offers no liberation from serfdom.
Well, he is a man of the Left, and as such, always fancies that collective (i.e. state) ownership will somehow be better than private ownership. I’m not sure why folks on the Left have failed to notice that the managers in the government and the managers in the private sector are essentially interchangeable.
“Amazon’s Alexa, for example, is the portal to a totalitarian, fully centralised system of preference creation and satisfaction.”
Risible.
You underestimate the enormity of common stupidity and mindless credulity.. it is everywhere and growing rapidly.
Books like that of the author are ‘interesting’ in that they present a mental challenge to the reader but they are not interesting in the sense that they don’t have any use nor make any difference to what we do in the future.
Today, all young people are brought up with the internet. There is no reason to remember anything because the internet is there to prod you. There is no reason to specialise because the internet becomes the specialist. Does this mean that everybody dumbs down? Does it mean that individuality will be seen as a bad thing? Every day history is being rewritten; does that mean that only an ‘official’ history will be available? Does it mean that books will be unnecessary?
So, if a tribe exists somewhere on the planet, totally cut off from the internet, with written books containing its history, with a system of adding and multiplying numbers mentally, with reading and writing being prized as key skills, with physical fitness being important for a normal life…in the future will the tribe be seen as backward or ahead of its time?
You seem to assume that historical, scientific, political and other information on the internet is generally correct? Surely you must know that 90% of it (if it isn’t garbage) is skewed to tie in with some nefarious agenda, usually trying to sell you something you don’t need, often worse.. it may be trying to convert you into a devoted self, happy to give your life or at least your labour to your master without even realising it?
I don’t think I gave that impression. Maybe you’re right. I asked a question, that is all. But I agree with you. My point is that when reading is unfashionable, then books become unnecessary and too expensive to produce. Why then have libraries to preserve old books? When a podcast becomes fashionable there could be no books to allow an alternate version.
I think you really misread it.
This was just as true of newspapers, and printed books stored in libraries. The Internet is just a larger firehose for delivering information. It is up to us all to get better at winnowing truth from this stream.
“Feudalism” my rosy pink patootie. The feudal system persisted in a time when information could be withheld at will by a small nobility from a large class of manual laborers. It ended with technology and the free exchange of information, and it will not return.
There is social democracy everywhere outside of China/NPKR, even in the reforming Gulf. The problem for the old communist/socialist activists is that there is no longer an interest in political economics (a Marxist invention itself originally).
Instead, the social democrats have turned towards culture and focus on identity groups, gender and the environment.
Certainly, the cultural powerholders could be said to be digital, and over in the Californian tech corporations. But the identity politics discourse is now pursued by all the principal stakeholdes in the civic realm.
Nobody forces anyone else to buy online. It is still entirely optional.
Yees Maaster..
Prohibitive onshore taxes give offshore companies an advantage.
Varoufakis is one of a handful of self-defined Leftists whom I wished constituted the normative Left (the others being Camille Paglia, Glenn Greenwald, Matt Taibi and a few other contrarian journalists of that stripe). His analysis of the Greek debt crisis was spot on, and for a Leftist to get an economic analysis right is so rare as to be notable. This time, however, he is a little off, though technofeudalism is a good coinage and captures part of what is going on.
His analysis falters because he is so enamoured of attacking capitalism, that he can’t see that the owners of “cloud capital” aren’t in charge. The professional managers, especially those in tech and financial firms, are in charge. The actual owners (who include a goodly portion of the working class through pension funds and mutual funds) no longer have much say in anything. Most shares (in the US at least, and I suspect it’s true throughout the developed world) are voted by professional managers, not by their beneficial owners.
James Burnham thought capitalism had been replaced by managerialism as early as the late 1940s. I think he was a bit ahead of reality, but it certainly has been now.
James Burnham?
Notable figure on the American right (after he abandoned Trostskyism), wrote for and helped found William F. Buckley, Jr.’s National Review. His ideas on what replaced capitalism were set forth in a 1941 book titled The Managerial Elite (so correction to my post… early 1940’s). He predicted that the managerial class would replace the capitalists as the dominant economic class as has arguably happened. His writings are arguable a precursor to similar ideas from within the Communist bloc — Djilas’s notion of “the New Class”.
I’m a firm Hayekian in my economic views. Quite frankly, I want capitalism back.
Ah, you were correcting a typo on my part, not wondering who Burnham was… I shall edit and replace the errant “Buchanan” with the correct Burnham.
Thank you.
But I don’t buy things because a machine told me to. I don’t think I’ve ever bought anything because of any kind of internet advertisement. At best, it’s made me aware of a product’s existence; that’s about it.
“Son, do you believe it’s really me?”
This is a very refreshing insight into one aspect of how technology exerts control over us in the modern world. Free of the constant media hysteria about the threats of supernaturally sentient AI.
The fact is, while most people are busy worrying about sentient machines enslaving us. Non-sentient machines are already achieving this right under our noses, to little fanfare.
Uh huh. Back here on the real internet, Alexa loses money hand over fist exactly because people do not buy things through it, let alone have their “preferences falsified” by it. Amazon imagined it as a verbal way to order things from their site combined with many upgradeable “skills”, but hardly anyone uses it for that and Alexa is now largely used only for setting kitchen timers and playing music (loss leaders, in other words). It’s been a financial disaster for them.
Also, Amazon is a marketplace used by many different companies, and far from being a titan of “cloud capital” it makes razor-thin margins on its retail operations (nearly all profit coming from AWS which is irrelevant to consumers). Oh yeah and ChatGPT is not becoming independent of “us” let alone the glorified radio alarm clock that is Alexa, neither can control their user’s minds, and capitalism still isn’t dead.
It’d be great if Unherd could beef up their tech fact checking operation because so many otherwise salvageable articles get posted here that contain basic errors anyone with tech experience would notice immediately. Though an article like this is perhaps beyond the realm of fact checking, being more like painting with words than a coherent argument. Like all hard-leftists Varoufakis doesn’t seem to care much about whether what he says is actually true or false, it’s all about the feelings behind the words that matter. Maybe he feels like his own brain has been asset stripped, but it still functions for many of us.
What this techo-feudalism has in common with capitalism is that it still uses ‘freedom of choice’ to trick us into thinking it’s all wonderfully fair. The owner of the 19thC Manchester cotton Mill could argue that his workers weren’t forced to work 12 hour shifts for him. It was a freely made contract between employer and employee. (Unlike the relationship between serf and Lord.)
Similarly, the tech titans can argue we aren’t forced to use their tech platforms. It’s free choice. Both are equally disingenuous of course.
I think we are approaching a time in which people will pledge themselves to serfdom if it spares them from outright homelessness and abject poverty. Better a serf than a beggar, that will be the thinking.
Yes, again it will all be under the guise of ‘free choice’.
Yes, we feed the syatem that will stsrve us is nothing if not ironic.
Much written on this in recent months. One tech commentator I follow believes Chat may yturn the internet dark in a bid to stop feeding the beast andsome evidence of this recently around APIs and lawsuits. Certainly alot of activiry in private cloud storage, space storage (no leguslative oveesight), etc. But with G20 signing off global digital ID for testing in Ghana, this topic about to hit a major crossroads.
There will come a time when Chat GPT4 evolves into what is currently called “ artificial general intelligence “a term created in the tech industry to mean an artificial intelligence which manifests as an autonomous agent and exceeds human capabilities in all domains and tasks. This is thought to be only a few years away and will quickly give ys personal assistants, self driving vehicles and robot servants. As long as people can get these with a UBI then I dont care about techno feudalism
A very interesting read and much of it rings true for me. I feel trapped by having to pay rent for many of my services – Microsoft, Apple, music, etc. much preferred the time when I could just buy a product. However the author does not produce any antidotes to this situation although he says it can be done. Is this a ploy to get us to buy the book so we can find out?
I do *feel* like a lot of people have changed significantly and are behaving like automata. Everyone is trapped constantly in their phones where their consumer preferences are being analysed and shaped by TikTok and Instagram, Amazon and Temu. We are all being moulded into the little nodes of data that help to propel the machine through our information and our consumption. Our opinions are shaped there, our ways of being are shaped there, people are even beginning to look the same as one another and have developed a whole new set of facial expressions that began on video platforms like TikTok and in product videos and are now beginning to appear in real life. It’s absolutely scary. I have no idea how to fight back.
Although I have historically disagreed with the author in many topics, I believe he has really nailed it in this article. Well done!
Comment now published (see above)
Fascinating. Our elites have already taken a look at us and found us unsatisfactory, thus in need of “education” in “correct” opinions, which certainly seems to be making us miserable. That they’ve also instructed the development of marketing algorithms and LLM AIs is also not coincidental I am sure. The future’s bright for the few, it seems.
This would also dovetail well with the paradoxical behaviour of corporations who cosy-up with “progressive” organisations and ideologies which would at first sight seem to be inimical to their business interests.
Thanks again for a thought provoking piece.
This guy is always interesting. I saw some good talks by him on youtube a few years ago.
This is nonsense. For “capitalism” I always substitute the word “freedom” to see what is the point being made – usually some sort of enslavement under a socialist tyranny.
This foolishness belongs in the Guardian
There was an article in there which wasn’t near as good as the article above.
When will the author accept responsibility for his role in the destruction of the Greek economy?
Evidence please …