Daily Archive: 15 Aug 2017

Aug 15

SB Nation and the Failure of Capitalism

SB Nation and the Failure of Capitalism

We were having a conversation about Vox Media in the comments and someone sent me a very interesting article, How SB Nation Profits Off an Army of Exploited Workers. It’s long and deeply reported. I recommend checking it out. But I wanted to discuss it in a general sense: how companies manage to exploit free labor.

Rewards Don’t Follow Contribution

One of my main interests in economics is how rewards don’t go to those who do the best or most important work. Instead, rewards go to those who just happen to make a contribution at the right time. Any major innovation is the result of countless people working over variable time scales. But if you are unlucky enough to add to the innovation at a point when it can’t be monetized, you are largely out of luck.

What is going on with many internet companies is similar to this. Since most people weren’t on the internet in the 1980s, let me explain what it was like. Because it was something of a small community made up of relatively affluent people, there was great altruism. (It’s easier to be altruistic if you aren’t worried about making the rent.) People created software and just gave it away, for example.

Now, this is still true of the internet. The difference is that there are so many people trying to make a profit off all this free work. And note: it wasn’t just software. I remember in the early 90s, there was this guy on rec.arts.startrek.tng who each week wrote a narrative summary of the new Star Trek: The Next Generation episode in addition to a surprisingly deep analysis of it. He did it for no reason other than that he was a fan and wanted to share it. He got lots of positive feedback as well, of course.

SB Nation Steals From Creators

And that’s kind of how SB Nation works. It started with sports fan blogs. Tyler Bleszinski and Markos Moulitsas looked at this and said: light bulb! Just as DailyKos had been very successful that leveraging people’s natural tendency to want to share their political beliefs, SB Nation would leverage the same thing for sports. And it’s amazing how successful a company can be when all it does is sell work that people do for free.

If we lived in a rational society that hadn’t been fed capitalist propaganda from before living memory, we would see this for what it is: stealing. But trust me: I know what the capitalist apologist will say, “But these people had the brilliant idea of leveraging all this free work. Besides, no one is forcing these people to write for SB Nation!”

You can say the same thing for stealing, “But I had the idea of stealing that car you never use. Besides, it’s not like you need it!” The idea of economic systems is that they are supposed to distribute resources. Capitalism does a really bad job of this. It rewards the very worst aspects of human behavior.

And note: I’m not saying that distribution is valueless. It’s like banking. Bankers should make money for distributing capital to where it ought to go. But when you find that 40 percent of your economy is tied up in finance (as it was before the crash of 2008), then you know that something is wrong. And in the case of SB Nation, something is clearly wrong: their outlay for all their fan sites is in the low single digits of millions of dollars for a billion dollar company.

The Failure of Capitalism

My concern isn’t about SB Nation particularly. It is rather that we all accept the idea that those who are rewarded in our economy are not those who really create things. We accept, without thinking, that there is nothing wrong with the SB Nation model.

All of this brings us back to the “gig economy.” It is the polar opposite of the union economy. Businesses love it because they not only don’t have to deal with the combined power of labor, they don’t even have to worry that any union will be created. Those people at SB Nation who do get paid (extremely poorly — like $600/month for a site editor, which is a full-time position) are independent contractors.

Every time I bring these kinds of issues up, I get push-back from people. First they point out that the Soviet Union failed. Well first, I’m not proposing the Soviet Union as a system. But let’s assume I was. The truth is that people did much better under the Soviet Union than they did under the tsars. And I can’t say that they have done better since. So this idea that the Soviet Union was a failure is mostly just western dogma that few people take the time to think about. They just know.

Then they talk about all the great things capitalism has brought us. This I find bizarre. People get blinded by shiny objects. As Ha-Joon Chang pointed out in 23 Things They Don’t Tell You About Capitalism, the washing machine had a far more profound effect on our lives than the computer. So it’s ridiculous to think that unless we have people starving in the streets we won’t have iPhones.

Demand a Better System

So we could have a better economic system. We could have a system that more closely matches reward with contribution. (Note: I am not calling for a meritocratic economic system; I’m just noting that it would be better than what we have.) But such a system would never have the kind of economic inequality that the power elites now believe is their right. And the rest of us will never call for it as long as we are blinded by the idea our weird form of capitalism is an unquestioned good.

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