Capitalism is a powerful tool: By compressing enormous amounts of information regarding supply and emand into a single number—the market price—buyers and sellers are able to make remarkably intelligent
decisions simply by engaging in
self-interested behavior. But in
a big-data world, where a supercomputer can fit into our pocket
and a simple Internet search allows us to find every product under the Sun, do we still need it?
In Reinventing Capitalism
in the Age of Big Data, Viktor
Mayer-Schönberger and Thomas
Ramge argue that big data will
transform our economies on a
fundamental level. Money will
become obsolete, they argue, replaced by metadata. Instead of a
single market price for each commodity, sophisticated matching
algorithms will use a bundle of specifications and personal preferences to select just
the right product for you. Artificial intelligence powered by machine-learning techniques will relentlessly negotiate the best
possible transaction on your behalf. Capital
By Andrew W. Lo
BOOKS et al.
will still be important, they concede, but
increasingly just for its signaling content.
“Venture informers” might even replace
Mayer-Schönberger, professor of internet governance and regulation at Oxford
University, and Ramge, a writer for The
Economist, believe that the untold gigabytes
of data we generate daily will
catalyze a restructuring of the
economy into one of small, flexible firms that quickly adapt to
changing economic conditions.
However, this isn’t so much a reinvention of capitalism as a new
more complex market signals and
The authors’ vision of the future
is of a decentralized economy with
thick markets of small data-rich
firms, reminiscent of Germany’s
famous Mittelstand and Adam
Smith’s “nation of shopkeepers.”
This may sound like a utopia, but
if it is, it’s a carefully tended one.
Although they believe that large “
superstar” information companies are merely a
temporary phenomenon that profits from
regulatory arbitrage, Mayer-Schönberger
and Ramge are wary of the concentration of data in the hands of too few. Their
remedy is aggressive antitrust action and
a mandate for companies to share proprietary data proportional to market share.
Mayer-Schönberger and Ramge caution
that liberal democracies might be tempted
to use big-data capitalism to bring the
economy under the greater control of the
state, citing an experiment conducted in
Chile in the 1970s as an example. During
the Allende administration, we learn, much
of the country’s production decisions were
placed under government control, directed
by a complex cybernetic model named Cy-bersyn. Although the technological capacity to fully manage an economy didn’t exist
at that time, the Chilean system managed
some partial successes before it was ended
after an America-backed coup d’état in 1973.
This brings us to an important conundrum in Reinventing Capitalism’s thesis:
The same technologies that could bring us
a decentralized, big-data world could also
bring about a resurgence in central planning and totalitarianism.
The high-growth, high-tech economy of
Communist China is now the envy of many
countries. Could this emerge as an alternative to big-data capitalism? The authors
seem to think so, as they articulate in a
chapter entitled “Unbundling Work.” Here,
they discuss the potential realization of the
Marxist slogan: “From each according to his
abilities, to each according to his needs.”
They do not, however, explore the darker
implications of proceeding down this path.
Clearly technophiles, the authors focus on the positive roles that technologies
can and do play in shaping society. But to
venerate Moore’s law without acknowledging Murphy’s law is a mistake. Threats to
privacy and cybersecurity, increases in systemic risk, automation-driven unemployment, and manipulation of elections and
public opinion by social media hacks are
new realities that we’ll need to reckon with
in the coming years.
Technological advances also create a form
of inequality in their own right—an elitism
that separates the technologically savvy from
the less sophisticated. Will the high priests
of data science become the new bourgeoisie, eventually leading to another Marxian
dialectic in which the proletariat will have
nothing to lose but their blockchains?
Reinventing Capitalism is a thought-provoking book that takes current trends in
business, economics, and the information
sciences and extrapolates them in a surprising manner. Nevertheless, its conclusion
should not be taken as a prediction of the
future, but rather as an idealistic sketch of
one possible outcome. j
Big data could catalyze a shift toward small firms that
can adapt quickly to economic conditions.
If liberal democracies can resist the urge to micromanage
the economy, big data could catalyze a new capitalism
The reviewer is at the MI T Sloan School of Management,
Massachusetts Institute of Technology, Cambridge, MA 02142,
USA. Email: firstname.lastname@example.org
Capitalism in the
Age of Big Data
Viktor Mayer-Schönberger and
Basic Books, 2018.