Technofeudalism

yanis varoufakis remembers the day in 1993 when he helped his father connect to the internet. varoufakis sr., a one-time communist who’d reluctantly made his peace with the existing order of things, was thoughtful. 

now that computers talk to each other, he asked, will it be impossible to overthrow capitalism – or is the network its achilles’ heel? 

capitalism’s future rarely seemed in doubt over the next 15 years. there were blips and bubbles, but no existential threats. the soviets were gone; capitalism’s supposed gravediggers, the working classes, weren’t in a revolutionary mood. the internet grew and grew, opening a new chapter in the centuries-old story of capitalist accumulation. 

and then came the global financial crisis. that was existential. yanis varoufakis argues that the attempt to rescue capitalism after 2008 proved to be its undoing, launching us into a dystopia with big tech playing big brother. the internet, he thinks, was capitalism’s achilles’ heel. the fateful blow, however, was administered by its would-be saviors.  

how and why that happened is the topic of this chapter.

imagine you’ve just been beamed into an alien city. 

it’s a bustling but otherwise unremarkable kind of place. the shops are filled with the usual kinds of things: gadgets and games, music and movies, clothes and shoes. people place orders; goods are wrapped and tills rung up.

but as you stroll about, you notice something odd: every building, every bench, even the street beneath your feet, belongs to one man – jeff. what’s even odder is how the shops’ window displays change every time a new customer stops to look at them. you ask a passer-by what’s with that. “oh, that’s just the algorithm,” she shrugs. jeff owns that, too. 

the algorithm has an uncanny way of predicting what people want. every home contains a “digital assistant” called alexa that sets reminders, dims your lights, and orders fresh milk. alexa loves information. it tracks habits and documents whims. it knows your favorite song and what time you get up. and it tells jeff everything. it’s his data, after all. 

welcome to amazontown! 

the world’s largest e-commerce platform might look like a capitalist market, but it’s not. even in a monopolized market, where one corporation controls the supply and price of goods, buyers can talk to each other and form associations. but amazon’s users neither interact nor exchange information. the market’s invisible hand has been replaced by an algorithm. 

on closer inspection, amazon.com looks more feudal than capitalist. under feudalism, aristocratic lords owned all the land, which they divided into estates called fiefs. the lords rented these fiefs to subordinates called vassals. jeff’s “land” may be digital, but it’s also a kind of fief. in order to gain access to amazontown and the customers who shop there, vassal companies have to fork over up to 50 cents of every dollar they bring in. 

facebook, alibaba, tiktok, uber, and the other big tech companies work in a similar way: they’re all in the feudal business of renting out fiefs. which poses a question: is an economic system dominated by corporations running cutting-edge software on medieval hardware still capitalism? and if the answer’s no, shouldn’t we find a new name for that system – something like “technofeudalism,” say? that, in a nutshell, is the big idea we’ll be exploring in this chapter. first, though, we need to back up a bit and define some terms. 

our first concept is easy enough to define: a capitalist is someone who owns capital. what’s that, you ask? the word shares a common etymology with “cattle,” which points us in the right direction: capital is moveable property. but it’s more than that. 

capital does something. in economese, it’s the “produced means of production.” in plain english, it’s something humans make in order to make other things. a sword isn’t capital: all it “produces” is death. a hammer is; so are plows, looms, and automobile-assembling robots. 

land isn’t capital – it’s not made by humans – but it generates income: rent. think back to those vassals paying for access to fertile soil. before capitalism, wealth and power flowed from ownership of land. it was, in short, rent that made the feudal system tick. 

under capitalism, wealth and power flow from capital. capitalists entice or coerce workers to use capital – their tools and factories and assembly lines – to produce commodities. the money they make selling those commodities generates income. subtract the cost of investing in capital and paying workers wages and you get the capitalist’s holy grail: profit. 

there’s an important difference between rent and profit: only the latter is vulnerable to market competition. a grocer worries about her bottom line every time a new grocery opens. the landlord who owns her shop doesn’t. rising demand for property drives up the value of land – and rents. the landlord doesn’t have to do anything; he makes money in his sleep. 

adam smith, one of the first analysts of the capitalist system that emerged in eighteenth-century britain, often talked about industrious types like our grocer. for smith, capitalists’ vulnerability to competition forced them to find ever more streamlined ways of providing life’s necessities. their greed was a paradoxical virtue: the pursuit of profit in cut-throat markets ensured constant innovation. even workers who initially suffered at the hands of wage-slashing bosses ultimately benefited. greater efficiency, after all, lowers prices for everyone. that, he thought, was a recipe for the wealth of nations. 

smith saw feudal lords as the natural enemies of capitalist prosperity. it wasn’t just that they had an interest in keeping land out of productive use to artificially inflate rents – smith also worried about what they did with their income. workers spend their wages on the goods capitalists produce. capitalists reinvest profits in new machinery to maintain their competitive edge. rent, by contrast, gets stashed away in speculative assets like art and real estate. it doesn’t enter circulation, starving the economy of investment and undermining growth. 

now that we’ve defined some terms, we can start thinking about big tech’s place on the feudalism-capitalism spectrum. 

recall what we said about capitalists: they pay workers to use capital to make things. we can use these three concepts – commodities, workers, and capital – as points of reference. 

big tech doesn’t really create commodities. google, for example, doesn’t sell search results and alexa doesn’t demand fees for answering questions. big tech firms don’t appear to be especially concerned about profits, either. uber, for example, reported its first profitable quarter in 2023 after spending a decade and a half in the red. 

then there’s labor. capitalist conglomerates like general motors typically allocate 80 percent of their income to paying their huge workforces’ wages and salaries. big tech, by contrast, operates on skeleton crews that typically collect just one percent of their employers’ income. 

finally, there’s capital. we’re used to seeing the means of production – think of the “dark satanic mills” dotting england’s landscape in its industrial heyday. “cloud capital” has a smaller footprint: big tech hides its server farms in anonymous warehouses and buries its optical fiber underground. but cloud capital isn’t conventional capital. it’s not the produced means of production, the human-made means of making other things that we talked about earlier. really, it’s a produced means of behavioral modification. 

what facebook, tiktok, instagram, youtube, and all the rest want is attention. they’re not overly fussed about subscriptions and sales because that’s not the primary objective. the real goal is getting apps and algorithms into our homes, onto our screens, and into our heads. 

attention is to big tech what land was to feudal lords. when we’re enclosed within the walls of a digital fief, neither the old-fashioned commodity-producing capitalists nor the masters of manipulation they hire to advertise their wares can reach us. unless the lords of these fiefs open the gates and let them in. which, of course, they do – for a fee. 

so far, so feudal. what about the “techno” part? well, once it has our attention, big tech can modify our behavior. its algorithms first build trust. spotify diligently learns what we like; alexa helps us with chores. then they nudge us to give up more information so they can cater to more of our whims. we’re training them to train us to train them. this cycle locks us into a fief. even if spotify’s sound quality is worse than its rivals’, users mostly won’t make the switch – those algorithms just don’t know them like spotify’s does, after all. 

big tech’s technofeudal order hasn’t done away with capitalism – not yet, anyway. for now, the two systems coexist: many of us work in capitalist labor markets and play in digital fiefs. 

but there’s been a shift in power. capitalism now plays second fiddle to big tech.

the owners of the means of production – those industrious, profit-hungry capitalists whom adam smith praised – no longer rule the world. yesterday’s heroic captains of industry have become subordinates. capitalist vassals who fail to render to caesar what is caesar’s can be destroyed with a single keystroke. all google has to do to eliminate a company is remove it from its search index. facebook, apple, and x have their own means of blocking, shadow-banning, and de-platforming unruly subjects. small businesses are just as vulnerable. dog walkers in alberta, street hawkers in jakarta, and uber drivers in barcelona now all depend on fee-charging digital fiefs to access their customers.

how did big tech gain this power over our lives? ironically, we did most of the heavy lifting. take instagram. it doesn’t really create anything – its users do. every day, millions of people upload photographs, videos, and stories. all instagram has to do is run its algorithm, which we’ve trained to sort, rank, and promote content in the most addictive way possible. uber, meanwhile, basically runs itself. its algorithm simply connects a group of sellers – the drivers – to potential customers. it’s the same story all over big tech. 

there’s a fitting feudal analogy here. we’ve talked about lords and vassals, but we haven’t looked at the laborers in this system – the serfs. these peasants were born into a lopsided social contract. in return for the right to live on their master’s estate, they tilled the earth, grazed livestock, tended fields, and brought in crops. when harvest time came, the lord’s sheriff came to collect “ground rent” – the bulk of what they’d produced. 

technofeudal lords have their own digital serfs: their users. whenever you send an email or post a picture or argue with strangers online, you’re paying digital ground rent. just having your phone connected to apps like google maps creates valuable surpluses for big tech. there’s no coercion here, though: we enjoy this labor. if we didn’t, we wouldn’t spend so much of our time generating all that data for cloud capital’s owners.

so, to go back to a point we made earlier, that’s why big tech only allocates around one percent of its income to wages: the people who do most of the work do it for free!

so how did we end up so far down the road to digital serfdom? 

to answer that, we have to go back to 2008.

when the american housing bubble burst that year, it sent shock waves through the global economy. just about every major financial institution stood on the brink of collapse. capitalism, in short, was in crisis. governments and central banks threw money at the problem, printing trillions of dollars and pegging interest rates back to almost zero. 

quantitative easing, as this policy was called, was the greatest liquidity event in the history of capitalism. all in all, some $35 trillion were pumped into flatlining economies. give capitalists free money, the idea went, and they’ll invest it in useful things. but the anticipated factories and the jobs that were supposed to put cash in ordinary folks’ pockets never materialized.

quantitative easing went hand-in-hand with “austerity,” penny-pinching government programs that depressed demand in a futile bid to reduce debt-to-gdp ratios. the recipients of the banks’ freshly minted money took one look at sluggish consumer markets and said no thanks. instead of investing in products and services, they went on a spending spree. 

the wave of speculation that followed was an “everything rally.” art, real estate, stocks and bonds, monkey jpegs – you name it, they bought it. rather than entering circulation, the money disappeared into rent-generating assets. if you’ve ever wondered why literal rents went through the roof in so many cities after 2008, there’s your answer. quantitative easing also explains how companies like uber survived despite failing to turn a profit: they surfed the waves of liquidity surging through silicon valley. nine in ten dollars that went into developing big tech companies like facebook were conjured out of thin air by central banks. 

big tech did invest in capital – only it was cloud capital, not capitalist capital. rather than channeling cash into the means of making other things, these companies patiently constructed the means of monopolizing our attention and modifying our behavior. that’s how big tech created and consolidated the digital fiefs capitalists must now pay to enter. 

the irony here is that governments and banks set out to rescue capitalism in 2008, but the cure was worse than the disease. the bailouts that followed the global financial crisis may go down in history as the cause of technofeudalism’s rise – and capitalism’s demise. 

in this chapter to technofeudalism by yanis varoufakis, you’ve learned that:

feudalism is a rent-based system: lords use their monopoly over land to extract fees from subordinates. capitalism, by contrast, is profit-orientated: capitalists pay workers to use their tools to create profitable new services and goods that are sold in free markets. profit and markets no longer govern our economies, however. today, big tech rules the world. its companies have replaced markets with walled-off commercial zones, transforming capitalists into rent-paying vassals and ordinary citizens into unpaid digital serfs.

okay, that’s it for this chapter. we hope you enjoyed it. if you can, please take the time to leave us a rating – we always appreciate your feedback. see you in the next chapter.