Nothing Is Free (Unless You Sign Up)
This capitalism is so refined that it consists of giving people free stuff in exchange for their willingness to take it.
This post originally appeared in Money Stuff.
We talked last month about the weirdly common Silicon Valley business model of “rapidly growing a business by selling its products below cost, subsidized by huge venture-capital investments, in the hopes of one day flipping to profitability once you’ve achieved scale.” One way to think about that model is as a cold-blooded rational economic calculation: The financial benefits of entrenching your company into everyone’s digital lives are so big that losing even billions of dollars to get there can be worth it.
But there are other ways to think about it, and they are much more fun. For instance, I like to think of it as a sort of venture-capitalist false consciousness. An important story of the modern technology industry is its contribution to inequality, as entrepreneurs and venture capitalists become fabulously wealthy with scalable digital products that do not create lots of middle-class jobs to match the wealth they build for their tiny elite class of owners. In the limit, robots will do all the work, and the people who invent and own the robots will have all the wealth, and everyone else will … what? Starve? Revolt? Maybe they will live off subsidies thrown off by venture capitalists who want to achieve scale. I wrote:
It is pleasing to imagine that the VCs might give away their products because they are (1) rapacious growth-hungry capitalists and (2) confused. “Please give me free food so that you can grow your daily active user base,” you’d say to the robot-farm monopoly, and its owners would reply “yes, scale, we must scale, here is your food,” and you’d be pleased to have put one over on capitalism.
The fun view of the venture-capital-subsidized perpetual-loss-leading user-growth-at-any-cost economy is that it represents socialism as the transcendent end state of capitalism, a capitalism that is so refined that it consists of just giving people free stuff in exchange only for their willingness to take it.
Kevin Roose at the New York Times wrote about this model the other day, with the headline “The Entire Economy Is MoviePass Now,” referencing MoviePass’s particularly silly approach in which you can see unlimited movies for less than the price of one movie ticket, with MoviePass eating the difference. (Though MoviePass is part of a public company, so it is not venture money.) He wrote:
I’ve got a great idea for a start-up. Want to hear the pitch?
It’s called the 75 Cent Dollar Store. We’re going to sell dollar bills for 75 cents — no service charges, no hidden fees, just crisp $1 bills for the price of three quarters. It’ll be huge.
Look he hasn’t gotten funding yet but give him time.
I will do him one better though. My startup will be an online subscription service in which we mail people checks, or Venmo them money maybe, or ugh send them Bitcoins who cares. They don’t have to give us quarters or anything. It’s just free; all they have to do is sign up. I expect that my monthly-active-user growth rate will be more than sufficient to support a $50 billion valuation; who’s in? I call it the Silicon Valley Universal Basic Income Project.
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