[How About This Book] Modern People Living as Serfs on the Land Called Big Tech

Mark Zuckerberg = Digital Lord
Facebook Users = Serfs Metaphor
Big Tech Capital is Cloud Capital
Shaking the Foundations of Traditional Capitalism
Labor Alienation, Market Order Collapse

The operating profit margins of big tech companies (large information technology firms) leading the digital age are impressive. Companies like Apple, Google, and Facebook often have operating profit margins exceeding 30%, sometimes even surpassing 50%. These figures were unimaginable for the leading companies of the past industrial era. When companies like General Motors (GM) led the U.S. economy, GM’s stock price soared even when it recorded an operating profit margin close to 10%.

One reason big tech companies can achieve profit margins unimaginable for companies of the past industrial era is their low proportion of paid labor. GM’s cars were made by GM workers, but today, Facebook generates enormous profits based on content voluntarily created for free by its users. In other words, Facebook incurs little cost for labor, enabling it to generate massive profits.

This is similar to how feudal lords in the medieval feudal era managed manorial economies based on serfs’ labor without bearing costs. Feudal lords could collect huge rents based on their estates, i.e., land, and big tech companies are pursuing rents through digital estates called platforms in the digital age.

This is why Greek progressive economist Yanis Varoufakis titled his book illuminating the new economic order created by big tech "Technofeudalism." Technofeudalism is a combination of the words "Techno" and "Feudalism."

[How About This Book] Modern People Living as Serfs on the Land Called Big Tech

Varoufakis calls the capital newly formed by big tech "cloud capital." He argues that cloud capital is a mutant form of capital conceptually different from the capital of industrial capitalism that dominated the 20th century, and it has destroyed the host, i.e., existing capitalism. Companies in the industrial capitalist era aimed to produce goods and pursue profits. However, the way big tech companies generate profits is closer to rent-seeking behavior than producing goods.

Varoufakis compares modern people who unknowingly contribute to Facebook’s enormous profits to serfs in the feudal era. Just as serfs labored for their lords, Facebook users contribute to the asset growth of Mark Zuckerberg, the digital lord and CEO of Meta (Facebook’s parent company).

Varoufakis describes platforms created by big tech companies such as Facebook, Apple Store, and Amazon.com as new manors of the digital age. These digital manors are fully privatized digital marketplaces. They resemble the enclosure movement that occurred long before the birth of industrial capitalism. The enclosure movement was the process of privatizing common land to pursue rents.

In the privatized cloud estates, neither sellers nor buyers enjoy any rights they would typically have in a conventional market. Even if Apple imposes huge fees on app developers in the Apple Store, the developers cannot resist. They must bear the heavy fee burden because they cannot give up the Apple Store. This is similar to the serfs who could not leave their feudal estates. If the political sphere does not side with app developers, Apple can pursue massive rent-seeking activities in the digital estate it created.

Big tech’s digital estates are also shaking up the existing market order. Amazon.com has made industrial-era capitalists sell their goods not in traditional markets but by accessing Amazon.com.

Varoufakis describes this as a vassal capitalist class growing on fertile land, i.e., the digital estate called Amazon.com, following big tech. By doing so, cloud lords have subordinated the industrial-era capitalists, creating a revolutionary class that will push them out from the top of society’s pyramid, Varoufakis explains. He emphasizes that the essence of technofeudalism is that rent has triumphed over profit.

In the industrial capitalist era, labor was the opponent of profit. However, with the advent of the big tech era and the resurgence of feudal rents, rent has triumphed over profit, deepening labor alienation. Labor alienation causes worsening inequality. Varoufakis originally wrote "Economics Stories for My Daughter" to explain why the world is unequal to his daughter. While writing, he realized that big tech was changing the existing capitalist order and thus wrote this book "Technofeudalism." Ultimately, Varoufakis explains that this book is an answer to a question his father asked him: "Will computer networks strengthen the capitalist world, or will they eventually reveal capitalism’s weakness, its Achilles’ heel?"

Varoufakis introduces his father as a man who worked in a steel mill and devoted much to the communist movement. His father taught him about capitalism and dreamed of the day when labor would shake the heart of the capitalist market system. However, contrary to his father’s hopes, Varoufakis explains that it is not labor but capital itself that is shaking the foundation of capitalism. The capital shaking capitalism’s foundation is, of course, cloud capital.

Influenced by his father, Varoufakis wrote the book from a leftist perspective. He briefly served as Greece’s finance minister in 2015 when the country faced severe economic difficulties. He describes that situation as an accident caused by the machinations of history.

To explain the new order created by big tech, Varoufakis takes a comprehensive look at the history of capitalism. He offers unique and interesting new perspectives, such as likening the 1976 Nixon shock to the Minotaur from Greek mythology.