The Industrial Age itself was based on a new relationship with time. Instead of paying people for the things they produced, we began to pay people for their time. The Industrial Age also brought a new kind of time-based money. In order to transact, merchants and companies needed to borrow coin, and then pay it back with interest. In a sense, it is money with a built-in clock. The business values of the Industrial Age became efficiency and growth, at the cost of most everything else. As the expression goes, time is money.
S+B: What’s wrong with that?
RUSHKOFF: Well, it just doesn’t work anymore. The economic operating system we’re using was devised in the 12th century, for purposes that may not be so relevant or appropriate today. An interest-based economy must pay back more money to the banks than was borrowed. Where does the additional money come from? Growth. This works well enough when there are new territories to conquer, but once that runs out, businesses must find other paths to growth.
At the end of the 20th century, many businesses came to realize that they couldn’t get any more efficient at making things, and that consumers couldn’t be pushed to consume any more. But these companies still had a growth mandate, and they had shareholders to satisfy. So many of them, GE for example, became more like pure financial institutions. They went into capital leasing and banking services. Since Industrial Age money was designed to favor the lender, not the innovator or the producer, why not become a lender, too?
Even today, we see many great companies—for example, Apple—sitting on massive stores of cash that they don’t know how to utilize.
S+B: And the digital economy can solve this problem?
RUSHKOFF:Yes, but only if we change how we think about the digital economy. So far, for most investors and financial firms, the digital economy means ultra-fast trading and increasingly abstracted financial instruments. This is just another version of strapping the cell phone to one’s body and becoming an “always on” slave to technology, instead of using digital technology to transcend the Industrial Age model.
Ultra-fast trading algorithms are trading, quite literally, in our future. Likewise, as I see it, a derivative is just another way of trying to compress time. Instead of buying a stock today, I can use a future to buy that stock six months from now. Or in further compression, I can buy a derivative of the derivative—purchasing that derivative six months from now, and so on.
This abstracted activity—Industrial Age economics on steroids—is so highly compressed and leveraged that it can accomplish in seconds what it takes a real stock exchange six months to accomplish. And although Wall Street might be bigger than the “real” economy, the derivatives exchange is now bigger than the stock exchange. A derivatives market, the IntercontinentalExchange, actually purchased the New York Stock Exchange. That was a watershed moment, and evidence of the failure of the time-based economy to create value in any real way. We’re using digital technology to amp up economic activity, not to innovate real-world transactions or to foster new value creation. That is present shock, rather than a genuine embrace of the opportunity of the present.
S+B: What’s the alternative?
RUSHKOFF: Rather than assuming that interest-bearing central currency and top-down bank investment are the only ways to grow an economy, we can begin to explore and retrieve some of the mechanisms we abandoned with the Industrial Revolution, and reinvent them through digital technology.
I’m suggesting we encourage a real-time economy, dedicated less to the storage and centralization of value than to transaction and exchange. We should focus less on capital accumulation over time and more on the velocity of money in the present. You can see the beginning of such approaches in alternative currencies, “favor exchanges” online (through which people can exchange goods and services), community-supported agriculture, and craft exchanges. Yes, it looks pretty crunchy for the moment—more like Burning Man than our economic future—but this is really just the beginning of a shift that will likely take a century to be fully realized.