Reinventing Capitalism In The Age of Big Data (Reading Notes)

Reinventing Capitalism in the Age of Big Data
The fusion of
Big Data
and
Artificial Intelligence
will lead to a new kind of capitalism:
Data Capitalism
© 2020 SocialCapital.Asia | SocialEnterpriseGuide.com
Reading Notes

Reinventing Capitalism in the
Age of Big Data shows how
modern technological change is
killing capitalism as we know it,
and what comes after.
SJ79 Book Reading Club
31st March, 2020 (Online
Session)
“The few who can understand the system
will be either so interested in its profits,
or so dependent on its favours, that there
will be no opposition from that class,
while, on the other hand, that great body
of people, mentally incapable of
comprehending the tremendous
advantage that Capital derives from the
system, will bear its burden without
complaint and, perhaps, without even
suspecting that the system is inimical to
their interests.”
~ Mayor Rothschild， 1863

Table of Content
Data capitalism could mean a more sustainable,
egalitarian economy, but the end of the firm –
including the end of stable employment – carries
great risks as well.
1. Reinventing Capitalism
2. Communicative Coordination
3. Markets & Money
4. Data-rich Markets
5. Companies & Control
6. Firm Futures
7. Capital Decline
8. Feedback Effects
9. Unbundling Work
10. Human Choice
Firm
Market

(1) Reinventing Capitalism
Data-rich markets
Enable
• decision-assistance systems
based on data and machine learning
• optimal transactions
Image by Gerd Altmann from Pixabay.com

(1) Reinventing Capitalism
Market-Driven Coordination
Greased by Rich Data
Gaining the ability to better coordinate human activity is a big deal.

(2) Communicative Coordination
How we communicate
have a profound impact on the way we coordinate

MARKET
Decentralized
&
Diffuse
FIRM
Centralized
&
Hierarchical
Coordinative Capacity
• Information Flow
• Decision Making

Floodgates to Globalization
"Coordination ranges from tyrannical to democratic. My notion of a well-
coordinated or organized society might envision a dominating elite - Plato's
philosopher-kings or an aristocracy, for example. Yours might envision
egalitarian institutions."
~ Charles Lindblom, Yale economist

(3) Markets and Money
Timely, Low Cost Flow of Information
Leads to Efficiency Gains
The market is essentially an ordering mechanism, growing up without
anybody wholly understanding it, that enables us to utilize widely
dispersed information about the significance of circumstances of
which we are mostly ignorant. Thus,
Markets

Decisions - the logical consequences of a person's preferences and
constraints - of what was demanded and what could be supplied.
Suppose we prefer bananas over apples, but also organic over
conventional and ripe over the green.
How would we choose between green conventional bananas
and ripe organic apples?
Markets

Organic
Ripe
Conventional
Green
Preference
Option 1
Option 2
Markets

Problem Statement:
• we know too little and thus can't recognize the most appropriate choice,
or
• we know so much that, overwhelmed, we choose poorly.
Either
Markets

Solution:
Successful processing of many different
dimensions of preferences.
Empowerment through Digital
Technologies
Markets

(3) Markets and Money Money
Money = Common Denominator
With money, we can condense information about our preferences into the
price and this information can be conveyed and processed by humans much
more easily
Using money and price we make markets work

Money and Price
IDEAL REALITY
• Streamline information flows
• Simplify transactional decision-making
• Constrained information flows
• Crippled decision-making*
* Prices ending in nines are good examples, making us believe that something is cheaper than it actually is
A system based on money and price solved a problem of too much information and not enough
processing power, but in the process of distilling information down to price, many details get lost

Money does not need to be worth something in its
own right.
How do we know what information is accurate and relevant,
and what isn't?
To put your money where your mouth is.
Money’s Informational Role

(4) Data-Rich Markets
Q: How to express our multiple preferences swiftly and easily?
A: Facilitate the translation of rich data
into effective transaction decisions
through technologies.

No Technology Description
1
Big Data
- Data Ontology / Metadata
Standard language for multidimensional information
streams. Facilitate flow of information.
2 Preference-Matching Algorithm Process information.
3 Adaptive Machine Learning
Make explicit what is embedded in the data, i.e. to tease our
preferences out of data;
Improve matching algorithm, which leads to superior data
ontologies.

If a system gathers our preferences without much effort on the
user’s part, and combines them with the right multidimensional
flow of information and the appropriate matching algorithms,
that will lead to a substantial increase in successful matches.
We will have at our disposal powerful data-rich systems that know us well enough to
offer meaningful assistance with our market transactions.

(5) Companies & Control
The Firm – Legal entity to raise capital, bundle risks, and help disentangle
management from ownership. A mechanism to enable human coordination.
The key difference between the market and the firm is
how decisions are made and by whom.
Firm exist wherever they can organize human activity more efficiently than the
market can.

(5) Companies & Control
Centralizing information flows and decision-making
as a tool of comprehensive control
• Resources management / allocation
• Transform information flows from accounting the past to strategic tool for
future business planning
To Navigate A Firm On A Path To Sustainable Profit

(6) Firm Futures
Delegation of decision-making is a delicate balancing act.
• Encourage faster innovation, facilitate radical innovation
• Drastically improve decision-making
Decentralized With Coordinated Control

(6) Firm Futures
Data-driven Managerial Decision Automation
Thriving firms staffed by fewer managers with data-driven machine
learning systems up and running.
To decide, to adapt, and to evolve in time.

(6) Firm Futures
Hybrid Organization – Part Firm, Part Market
Soft Power of
Persuasion
Hard Facts of
Data-driven
Evidence
Firms to embrace data-rich markets
• More market DNA
• More decentralization
• More internal competition

(6) Firm Futures
Organization of One
A single person who coordinates the market mechanisms and thus
becomes nothing but a market participant.
Greased by money, fuelled by rich data streams.
Decide what decisions to delegate to machines and harness the power of the
market to improve the way they coordinate.

(7) Capital Decline
1. Value - Medium of exchange for resources
2. Information - Connotes freedom of choice as well as relative power
Functions of capital
Capital in its function as value will continue to be useful in our
economy. But it will no longer be the only information game in town.

(7) Capital Decline
The shift away from price separates the act of payment
from the provision of (much) information.
• Price no longer the primary conveyor of information
• It becomes only one data point among many, rather than a bell
buoy in an ocean of noise
The informational center of gravity in markets is moving away from money – and
thus away from banks.

(7) Capital Decline
Money isn’t always an honest signal*,
nor is it the only one.
* An honest signal carries a cost that deters potential abusers. Talk is cheap. Not all
signals are equally honest.
Rewired market – As markets turn data rich, there is less need to
signal with money.

(7) Capital Decline
If markets teem with information that facilitates transactions,
that information itself holds value.
We may see transactions paid in data rather than money.
Google and Facebook would not be what they are without the billions of users
who pay for their services with personal data.

(7) Capital Decline
Investment in Information Intermediaries
that have capabilities beyond those of money and price.
Banks’ bet: if you get disrupted, you should at least own
some of the players that take away your business.

(7) Capital Decline
Rich Data, Poor Insight?
Before stable and successful business models emerge:
• A lot of uncertainty,
• A lot of trial and error.

(8) Feedback Effects
Distinct Effects When market become concentrated
Scale Effect Lower Cost
Network Effect Expands Utility. Tick Market.
Feedback Effect Collecting and Interpreting Feedback Data Improves The Product.
Any system can be steered in the direction we want as long as enough feedback loops are built in.

If something can be controlled, it ought to be, and
often in a centralized fashion.
Information flows as key enablers of feedback-driven cybernetics (the study of
systems control) may be used by human being or a block of human beings to
increase their control over the rest of the human race.
The danger of concentration: The desire for control

Without organizational enforcement, data-rich markets will be vulnerable to a dangerous
concentration of decision-making power and control.
To make sure that decision-making remains decentralized and markets
remain efficient:
1. Progressive Sharing Mandate
2. Reporting Rules
3. Effectiveness of Enforcement

With widespread machine learning systems running on rich data, we could
turbocharge nudging into a highly individualized (and thus precise) process of
shaping people’s perception.
Advised by a single system, society could progress toward common goals along a
coherent path.
Preserve not just markets but an open society in general.
!

(9) Unbundling Work
Reconfiguration of Labor Market
Human ingenuity: As manufacturing became more automated, the services
sector grew.
What is there to employ the middle-class
workers displaced in data-rich markets?

(9) Unbundling Work Policy Measures
Shrinking role of labor + shift in income distribution
Ideas Description
Distributive (conventional) • Taxing the sources of automation-driven income (e.g. “robo tax”).
• Seek to establish a more just tax system that focuses on where the value add is
generated.
Participatory (conventional) • Support the retraining of workers, which accepts that job creation happens when
human ingenuity is paired with the magic of the market.
Universal Basic Income
(radical)
• Has both a distributive and a participatory dimension to it.
• Comprehensive welfare program that gives everyone sufficient funds for a life of
dignity and relieves those who struggle in poverty.

(9) Unbundling Work Superstar Firms
If not into labor and not into capital, then where
has all the profit gone?
• Creative corporate tax planning
• Huge investment amount in R&D
for new products & lines of business

(9) Unbundling Work
To help our society cope with the changes of data-driven adaptive automation, to
safeguard that all can reap their share of the data dividend.
1. Making the companies that capture the profits of the data age pay the ones
getting uprooted as a result of it
2. Ensuring that market stay competitive and that society as a whole benefits
from data
3. Making human labor just a bit cheaper than machines
Policy Measures

(9) Unbundling Work Individual
Empowerment
For many more people to choose work beyond pay
To enable a richer perspective on work that straddles many more
aspects of human fulfilment than just what is represented by the
monthly paycheck.
What next after job’s benefit bundle? Gig Economy, Slasher?

(10) Human Choice Data-rich Markets
• Better matches resulting in more-satisfied participants, less waste.
• Superior coordination means less idling and fewer inefficiencies.
• Letting us transact conscientiously far more often than we can today.
• Further a more sustainable, less wasteful economy, compared to conventional
money-based market, and their excesses of greed and gluttony.

(10) Human Choice Data-rich Markets
Human-centric Firm Empty Corporate Shell
Employ many well-paid humans
doing work only they can do, but
may be managed in substantial part
by machines
Morph from social organizations into
largely legal entities that reap profits
but have dispensed with many human
employees
Great Recession Great Adjustment

(10) Human Choice
To be truly human, from being creative and adventurous in our
thinking about the new, to engaging with each other and forging
meaningful social bonds.
We Will Choose To Choose
The Human Touch
Losing the individual freedom to choose in the name of security, simplicity,
coherence, or perhaps just plain old maximization of profit would be a terrible
loss, far beyond the economic inefficiencies it would cause.

(10) Human Choice
When artificial intelligence and Big Data meet the social reality of human
coordination, we can become more sustainable.
The Clever Exploitation of Our Information Surplus
We will live better, more meaningful, and more sustainable lives.

In a world of
more and more
machines,
what will remain for us
humans to do?
SocialCapital.Asia | SocialEnterpriseGuide.com
Which decisions should we reserve
for ourselves and which should we
delegate?

From Data To Decisions
(1) Descriptive Analytics
Analysing data
(2) Predictive Analytics
Studying trends and patterns
(3) Prescriptive Analytics
Using data to make decisions
http://socialenterpriseguide.com/from-data-to-decision/

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Thank You!
Koh How Tze
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Reinventing Capitalism In The Age of Big Data (Reading Notes)

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