Here in the states, there’s an insurance company called GEICO – the Government Employees Insurance Company – which is owned by Berkshire Hathaway (Warren Buffett’s investment vehicle). They’re known for their tongue in cheek advertisements, one of which currently involves a motivational speaker who teaches people to “not become their parents” when they become homeowners. The conceit is that once you buy a house, you’ll start wearing Members Only jackets, buy throw pillows with embroidered trite expressions, and stop knowing how to interact with wait staff at restaurants without speaking too loudly and asking embarrassing questions. It works, although how it relates to bundling auto and homeowners insurance does escape me. In any event – I’ve come to realise lately that I’ve descended into post-middle age crankiness: I’m writing on the local newspaper’s comment section.
Specifically, I’m writing because Maine’s legislature passed a bill to authorise a referendum to ask the voters whether we should purchase the two local privately owned transmission and distribution utilities and, in effect “nationalise” them (it’s not nationalisation because Maine isn’t a nation, per se, but excuse me here – federalism is a pain in the ass when referring to the intersection of sovereign entities into the economy). The local utilities – Central Maine Power and Versant Energy – are among the worst in the country in terms of service delivery, recovery times post natural disasters, and transparency, and the Legislature as effectively said “no mas” (which is the right phrase, at least in CMP’s case, which is 81.5% owned by Iberdola, the Spanish monopoly power producer). My comments have been, I think, balanced: the bill which would nationalise the utilities leave a lot of details open, but the economics are straightforward, and I’ve leaned on the economics while acknowledging we need more detail.
What’s struck me in all of this is that there is some confusion about monopolies that persists in what I think is a kind of muscle memory capitalist thought process. We have embedded in our cultural thought process everywhere – the US, Canada, China, the EU, and the UK probably most of all – a concept that when we trade with one another, the government shouldn’t interfere in the process of setting prices. Well, maybe not everywhere: China says you can set prices but the government retains the right to retroactively reverse the transaction, but you hopefully get what I’m talking about. In our intellectual DNA, we have a notion that prices – values – are set by people and companies determining a supply and demand relationship, a set of indifference curves, and then transacting accordingly: we’ll reduce demand in the face of overpriced supply, and supply will decline in the face of reduced demand.
But there are, really, natural monopolies. Most of them are networks, which wasn’t a concept that Marx and other theorists on the slow but inexorable evolution of systems towards socialist and then communist and then post-communist anarchist constructs understood at all. Marx and Engels and Lenin understood economies as being constructed around mostly physical goods, and goods producers would naturally seek to exploit their advantage over non-producing consumers by combination, establishing monopolies which would either peacefully (via social democracy) or revolutionarily (via communist acceleration) become part of a civic or state apparatus, in aggregate migrating over time towards a state organised system of production. Those thinkers were, of course, wrong, not because physical goods might not tend towards that system – think of Amazon as a logistics provider, and the constant reduction in the number of actual manufacturers of physical goods – but because physical goods represent only a small fraction of what we consume. Mostly we want services, and most services are entirely bespoke – there is no generic “hairdresser” or “butcher” or “lawnmower” – they are not commodities, they are idiosyncratic craftspeople.
Power (not political power, mind you – I’m talking about ergs and voltage and the like), on the other hand, is generic. And thus Marx and Engels and Lenin were, really, prescient in thinking of such things – along with mail delivery (or “logistics”), and delivery of commodity energy like petrol, and telecommunication networks – as being such that they really do naturally evolve to monopolies. The transmission networks for generic commodities should be run by a single operator, one in which we, both as producers and consumers, determine the basis of the monopoly. It’s not often simple, however: sometimes it takes time. Is “energy” really that simple, when we build power grids which are designed to delivery massive amounts of point-generated power – from nuclear or coal-fired or natural gas generation stations – to diffuse consumers? Yes, it probably is. But when we add to the network diffuse sources of power – from small hydro dams, and micro- and mid-scale solar generation sources, and small to large scale windfarms – the network becomes more complicated. But at its heart, power distribution is a network function entirely. It may have been designed originally to deal with big production delivering to diffuse consumption, but as it evolves, the network is merely a utility. It does not change the nature of the good entering into it – the power produced by the nuclear plant or the solar panel or the hydro turbine – nor does the consumer essentially see a difference in terms of what he or she accepts in to consume.
Think about this with Facebook or Google. Both are, really, networks. Facebook owns up to it more generally – it defines itself as a social network – but Google is implicitly the same, in that it works to link consumers and producers via search questions online. Networks by definition are of value both to the producers and the consumers – but because the value is completely diffused, surely society (I won’t say the state just yet) had therefore a vested interest in the construction and profit extraction involved in the network. This isn’t because society has a desire to profit itself – it’s that the value of a network is built, fundamentally, in the latent or maybe potential energy of society itself. The more we interact, the more potential energy – in the form of ideas, in the form of innovation, in the form of accelerated discussions we have with one another which largely only involve sports or cat memes but in other ways generates transformative change – we create. That is a common resource; allowing joint stock companies to hoard that value for themselves is, really, absurd. Why would any society simply give a few members of itself the ability to shave off a commission on society’s productive potential, simply because they manage a virtual – or even physical -network? They deserve a rent, surely – some cost plus calculation which reflects the expense incurred in maintaining the servers and code which underpin the network – but do they deserve a commission on the value creation enabled by the network but in essence created by the joint product of concept producers and consuming value definers? Surely not: that should be preserved by society.
I’m not sure the “natural monopoly” question has been stated in these terms in the past. That is, I’m not sure natural monopolies have been thought of as networks: they aren’t producers, and they aren’t consumers, but rather it is markets themselves – the places in which things and ideas are transferred without transformation that are the natural monopolies. Or rather, we’ve lost the thread on that. At the birth of the United States, the idea of a postal monopoly and a payment systems monopoly was built into the constitution explicitly; both were eroded over time, or rather have ebbed and flowed through time, but they are still there in the founding document. But as we have moved towards an information age, the physical and social reality of what “the network” is has been lost.
Pace Claude Shannon, information is private – but the transmission mechanism is inherently public, because the transmission mechanism is required to enable information to exist, and also, it is always subject to tapping, to distortion, and that distortion is not the intent of either then sender or the receiver but is in effect inherent to any transmission process, and thus is of interest to everyone attached to the process – and from an ethical perspective, if there is a process which is of interest to everyone in a society or a system, it becomes inherently subject to common discussion and, ultimately, ownership.
Focusing on the concept that networks are the natural attachment point for common social ownership helps distinguish, really, where anti-trust conversations need to take place. Payment systems, for example, are direct natural monopolies – payment systems are designed to equalise the value exchange between payor and payee. Banks – to the extent that they do not simply act as payment systems – are not: they store value, and because value changes over time, they can create idiosyncratic values from time (x) and time (x+n). They also transform value as they lend in credit-risky loans, even though they take storage rights for non-credit-risky deposits. Quite differently, Facebook is a natural monopoly to the extent they simply allow for the creation of social networks, and that foundational technology should be open and subject to a simply utility payment; to the extent Facebook connects people through some kind of proprietary algorithm, that has value because it gives people new networks – but the underlying networking capability itself is a utility. And the value of what people post on Facebook is equivalent to the non-credit-risky deposist made in banks, but Facebook doesn’t conduct any risk activity in distributing that information akin to the process of making loans. Amazon’s logistics capability is a utility – much as UPS and FedEx and the US Postal Service and Royal Mail and Deutsche Post are utilities and should be viewed as such – but Amazon’s ability to finance the warehousing of huge quantities of goods for ready delivery to your door is not. It may have been paid for by the logistics network it created, but now that it is in place, the depots aren’t part of the network – they are end points, much like any retail warehouse is a produce end node in the network. In that sense, Amazon’s warehouses are equivalent to lending; the “depositors” – the non-credit risky other side of the accounting statement – is us, who pay up front to buy the stuff Amazon stores.
A thoughtful analysis of the global economy will reveal that networks underpin the accumulation of capital – pipelines, trade networks, electronic networks, telecommunications networks, electricity grids, media delivery systems – but it will also reveal a much greater set of economic actors who don’t care about delivery at all. I think of the best artists I know, actually, or writers like those of us on The Essence of Water: we create in the hope we will be transmitted, and we take advantage of the networks at our immediate disposal, but we create without the expectation of being consumed, only with the hope we will be noticed. Similarly, I think of the consumers who look diligently as being in the same league as great artists – much as collectors would have done in the pre-Internet and pre-electronic era, where to find a rare edition of Byron might have required chasing down leads across time and space, where experiencing a Chopin sonata would have required finding links to personal networks. The networks of today make the work of distribution and the work of discovery almost trivial – but the true artists of today, and the true connoisseurs, even more rare, are even more worthy of respect. After all, like the Amazon warehouse, they are simply a producer end point in the network system – only instead of being an end point of generically created goods, artists and authors are creating goods out of thin air. They are creating value from nothing, except that which the consumers on the other end of the network deem to be of value.
The networks of artists and connoisseurs are not in the business of commodities. The networks of Facebook and Google and Amazon take the technology of commodity networks – of payment systems and cargo logistics – and seek to overlay them on the deeply personal world of interpersonal relationships. That, I think, lies at the deep unease society has for social networks. Commodity networks can be nationalised – we can create a Pine Tree Power Company and absorb the current privately-owned distributors in Maine and make sure everyone has a stake and a voice in distributing power. And we could even nationalise Google, and make the interconnection of “Ask” and “Answer” something that isn’t subject to releasing our private data every time we do so. But Facebook… even if we nationalised Facebook, or TikTok, or Pinterest, we’ll still be posting our privacy to a network that is beyond our ken. Networks that trade in the non-commodity of our identity, of our creative ideas as producers and our creative will as consumers, will never be comfortable for us, and there is no solution for how to resolve the existential quandary of making our selves digitised.
There is no natural monopoly for social networks, even if there are obvious monopolies for commodity networks. Indeed, social networks may be best kept fully virtual – that is, never reduced to the ones and zeros of the electronic network which is so obviously best run in a common form. We could nationalise the network – which seems the best solution – but we won’t get rid of the unease that somehow there is a physical infrastructure over which the desires and creative potentials of our souls are forced to travel.
But there is no going back. It’s amazing to me that, in the space of less than a generation, we as a species have acquiesced in the commodification of our souls. And with that, I’ll hit “publish”, and see what happens.