Financialised Capitalism

In the classic form of capitalism, companies competed to sell their products to customers with the aim of producing profits to fuel further expansion. Today, companies no longer need to make profits in order to command massive valuations – Elon Musk‘s Tesla is worth $US 48 billion despite accelerating losses to $2B last year. Making money is no longer a prerequisite for business success. Instead, these companies serve as stock market vehicles, catering to the whims of investors rather than customers. This serves to remove any measure of control ordinary people might have been able to impose upon corporations through their choices in the market.


In a world where profits continue to rise but workers receive none of the benefits, wealth will accumulate at the top. There will be increasing amounts of capital available for investment. But in an industrialised, global society there are limited opportunities for further investment to increase profits. When oligarchal government policy ensures wages remain low, there is no incentive to invest in automation. Without government investment in blue sky research, there are no real innovations to fund. So instead, capital chases any possibilities for growth and is easily seduced.


Uber is a phone app which has ‘innovated’ away worker protections in the taxi industry. Uber lost $4.5B on $7.5B of revenue last year. Uber is worth $68B. This would appear to be a non-sequiter, but Uber is a great example of how customers and workers are no longer of any relevance to a corporation. Uber is a brand, but instead of being marketed to customers in the conventional sense, Uber’s target audience is investors. Investors who love the idea of innovation and hate worker protections.


Investors are – contrary to meritocratic myths – not endowed with any special decision making prowess. They just happen to have money, whether by their own success or more often by inheritance. These new tech companies have discovered that marketing works on investors as well as customers. Uber pushes the idea of disruption so far that they regularly ignore public safety regulations. By treating their workers as independent contractors, they not only circumvent labour laws but also play into the bootstrapping prejudices of the investing class.


Tesla CEO Elon Musk’s science nerd persona makes him seem like a visionary to investors who lack the expertise to see through his act. Through both his hyperloop plan and fascination with Mars, he evokes classic pulp scifi tropes which resonate with their youth. The very idea of superhuman corporate figureheads connects with the Randian narratives which retain a foothold upon the capitalist class. Through the creation of organically ‘newsworthy’ events, Tesla continues to remain front of mind for both consumers and investors.


With so much wealth sloshing around in the hands of investors, these companies have decided to target them rather than trying to compete for customers. This investor wealth can then be used to subsidise lossmaking companies indefinitely as long as the valuation keeps increasing. Twitter has never made a profit and is still valued at $25B. Thus, it serves as a kind of CEO-class welfare (since workers are still being screwed in order to suit the investors’ prejudices), but one paid by capitalists.


If it hurts capitalists profits, then why am I – well known disliker of capitalists – writing about it?  Firstly, this disconnection between customers and company performance removes any power which regular people can have over company actions. Although markets are not democratic, each person does have some level of power over corporate actions through the market mechanism. If it doesn’t matter whether companies make money or not, then this power is removed and corporate power is solely accountable to investors.


Secondly, the process of marketing also has an effect on the nature of the product, as it is adjusted towards the imagined expectations of the market. This is bad enough when the marketing is catering towards attracting consumers, but becomes outright nonsensical when targeting investors.


Investors are interested in what might make them more money, not the product’s performance. So we get abominations like the Juicero, a $700 juicing machine that can only squeeze juice from pre-mashed, QR-coded bags. No rational consumer would choose to buy a juicing machine which is internet connected and requires an ongoing contract for pre-mashed juice bags instead of a much cheaper one which is compatable with regular fruit. But investors are easily seduced by marketing buzzwords and the possibility of ongoing sales when they have more capital than viable investments exist. So easily seduced that Juicero was worth at least $120M.


Thirdly, this is an incredible waste of resources. Snapchat was worth $30B at the time of its IPO. Is there no better way we can think to allocate these funds? $30B could end world hunger, but instead we have a phone app. Our cities have inadequate infrastructure because rich folk use their power to avoid taxes. Governments throughout the world shudder under the weight of debt.

The rich have so much wealth that they cannot find viable places to invest it. I suggest they start by paying their taxes.