Fake News & Rethinking Digital Capitalism

Seven Magazine

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A rough draft of Seven Magazine.
Just as climate change is the natural byproduct of fossil capitalism, so is fake news the byproduct of digital capitalism.

market-cap

As described in Steve Denning’s Forbes article, “Roger Martin: How ‘The Talent’ Turned Into Vampires:”
How did America—a country dedicated to the proposition that all men are created equal—become one of the most unequal countries on the planet? Why do the nation’s leaders now spend so much of their time feeding at the trough and getting ever more for themselves? Why has public-mindedness in our leaders given way in so many instances to limitless greed?
These questions are being raised, not in some anti-capitalist rag from the extreme Left, but in the staid pro-business pages of the Harvard Business Review, in a seminal article by Roger Martin, the former dean of the Rotman School of Business and the academic director of the Martin Prosperity Institute: “The Rise and (Likely) Fall of the Talent Economy.
One key factor, argues Martin, is a fundamental shift in nature of the economy. Fifty years ago, “72% of the top 50 U.S. companies by market capitalization still owed their positions to the control and exploitation of natural resources.” But in the latter part of the 20th century, a new kind of organization began to emerge: an organization that prospered not by natural resources but through “the control and exploitation of human talent.”
We need to build a world where Facebook and Google neither wield much clout nor monopolise problem-solving.

Fake news — deliberately constructed lies, in the form of news articles, meant to mislead the public — is big news theses days. Organizations, such as Google (Alphabet) and Facebook, that prosper through the control and exploitation of human have helped build the fake news phenomenon. According to Business Insider, “Google’s search algorithm has been changed over the last year to increasingly reward search results based on how likely you are to click on them.” Also according to Business Insider, “the top malicious fake news stories actually outperformed legitimate news stories.”

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Evgeny Morozov believes that fake news hides the real enemy – the digital giants:
[The] fake news narrative is itself fake: it’s a shallow explanation of a complex, systemic problem, the very existence of which they still refuse to acknowledge. The ease with which mainstream institutions, from ruling parties to thinktanks to the media, have converged upon “fake news” as their preferred lens on the unfolding crisis says a lot about the impermeability of their world view.
The big threat facing western societies today is not so much the emergence of illiberal democracy abroad as the persistence of immature democracy at home. This immaturity, exhibited almost daily by the elites, manifests itself in two types of denial: the denial of the economic origins of most of today’s problems; and the denial of the profound corruption of professional expertise….
But isn’t it obvious that no amount of foreign interference – by Russia or any other government – could produce viral news at scale? There have always been crazy movements (remember Lyndon LaRouche?) that lived and breathed fake news. What they lacked was not the political and financial cover from Russia but, rather, today’s powerful digital infrastructure, lavishly subsidised by online advertising, for making their crazy theories go viral….
Caught between the two denials, the elites will never stop searching for innovative solutions to the problem of fake news – much as they never stopped searching for innovative solutions to climate change. The two issues do have a certain similarity: just as climate change is the natural byproduct of fossil capitalism, so is fake news the byproduct of digital capitalism.
The only solution to the problem of fake news that neither misdiagnoses the problem nor overpowers the elites is to completely rethink the fundamentals of digital capitalism. We need to make online advertising – and its destructive click-and-share drive – less central to how we live, work and communicate. At the same time, we need to delegate more decision-making power to citizens – rather than the easily corruptible experts and venal corporations.
This means building a world where Facebook and Google neither wield much clout nor monopolise problem-solving. A formidable task worthy of mature democracies.
The Financial Times recently reported that BuzzFeed, which has a reported market value of $1.5 billion, fell short of its 2015 revenue target by about 32%, pulling in less than $170 million after projecting $250 million in revenue. FT also says BuzzFeed cut its internal forecast for the current year’s revenue to about half of the company’s previous estimate of $500 million.
Umair Haque writes in Co.Exist:
This week, BuzzFeed downgraded its revenue projections, which sent media and advertising into a tizzy. If even a page-view juggernaut like BuzzFeed was struggling in the current advertising climate, what did that mean for the rest of the online media industry? But that’s all missing the larger point.
The future of advertising is about elevation and realization, not engagement and reach.
Digital ads suck strategically—as a product, a service, a format, a way of relating to people.
The problem isn’t about BuzzFeed…. [T]he real story is about the dark truth at the heart of postmodern media. Its business model is built on a deflationary asset: digital ads.
Why are digital ads deflating, ever cheaper, less valuable? Because, to put it diplomatically, they suck. I don’t mean creatively. Many of them are interesting and provocative creatively. They suck strategically—as a product, a service, a format, a way of relating to people. That’s the simple truth—hence, the abysmally low rates of interest in them by consumers, who aren’t captive to them like TV viewers are. They’re a liability—an investment that yields no real gains, only losses.
That number, in fact, echoed language in the company’s original prospectus, where Facebook wrote that “total worldwide advertising spending in 2010 was $588 billion,” in the first paragraph of the document section titled “Our Market Opportunity,”
The skeptics from New York – America’s advertising capital – could be forgiven for laughing then.
Facebook sold over $1 billion more in advertising during the period than it did in the same quarter a year ago, driving total revenue up 41% to $4.5 billion.
Google and Facebook are advertising companies, nearly all of their revenue comes from advertising. Yet, they are not very good advertising companies in the sense that the best advertising in based on emotional connections. This is not well understood in Silicon Valley and also why kindergartners are often smarter than business school students.

[Silicon Valley is] a hard place to write about because there’s a lack of emotional content. It’s a cold place.

Google is an old business…. Google has never really been about human psychology.
~ Tyler Cowen
In the same fashion that Madison Avenue laughed at Mark Zuckerberg in 2010, another company will come along and out perform both Google and Facebook.
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