#tech exceptionalism

Patent trolls — who secure “with a computer” patents and then extract ransoms from people doing normal things on threat of a lawsuit — are an underappreciated form of “tech exceptionalism.” Normally, “tech exceptionalism” refers to bros who wave away things like privacy invasions by arguing that “with a computer” makes it all different.

These tech exceptionalists are the legit face of tech exceptionalism, the Forbes 30 Under 30 set. They’re grifters, but they’re celebrated grifters. There’s a whole bottom-feeding sludge of tech exceptionalists that don’t get the same kind of attention, like patent trolls.

Oh, and the fintech industry.

As Riley Quinn says, “when you hear ‘fintech,’ think: ‘unlicensed bank.’” The majority of fintech “innovation” consists of adding “with a computer” to highly regulated activities and declaring them to be unregulated (and, in the case of crypto, unregulatable).

There are a lot of heavily regulated financial activities, like dealing in securities (something the crypto industry is definitely doing and claims it isn’t). Most people don’t buy or sell securities regularly — indeed, most Americans own little or no stocks.

But you know what regulated financial activity a lot of Americans participate in?

Going into debt.

As wages stagnate and the price of housing, medical care, childcare, transportation and education soar, Americans fund their consumption with debt. Trillions of dollars’ worth of debt. Many of us are privileged to borrow money by walking into a bank and asking for a loan, but millions of Americans are denied that genteel experience.

Instead, working Americans increasingly rely on payday lenders and other usurers who charge sky-high interest rates, on top of penalties and fees, trapping borrowers in an endless cycle of indebtedness. This is an historical sign of a civilization in decline: productive workers require loans to engage in useful activities. Normally, the activity pans out — the crop comes in, say — and the debt is repaid.

But eventually, you’ll get a bad beat. The crop fails, the workshop burns down, a pandemic shuts down production. Instead of paying off your debt, you have to roll it over. Now, you’re in an even worse situation, and the next time you catch a bad break, you go further into debt. Over time, all production comes under the control of creditors.

The historical answer to this is jubilee: a regular wiping-away of all debt. While this was often dressed up in moral language, there was an absolutely practical rationale for it. Without jubilee, eventually, all the farmers stop growing food so that they can grow ornamental flowers for their creditors’ tables. Then, as starvation sets in, civilization collapses:

https://pluralistic.net/2022/07/08/jubilant/#construire-des-passerelles

As the debt historian Michael Hudson says, “Debts that can’t be paid, won’t be paid.” Without jubilee, indebtedness becomes a chronic and inescapable condition. As more and more creditors attach their claims to debtors’ assets, they have to compete with one another to terrorize the debtor into paying them off, first. One creditor might threaten to garnish your paycheck. Another, to repossess your car. Another, to evict you from your home. Another, to break your arm. Debts that can’t be paid, won’t be paid — but when you have a choice between a broken arm and stealing from your kid’s college fund or the cash-register, maybe the debt can be paid…a little. Of course, digital tools offer all kinds of exciting new tools for arm-breakers — immobilizing your car, say, or deleting the apps on your phone, starting with the ones you use most often:

https://pluralistic.net/2021/04/02/innovation-unlocks-markets/#digital-arm-breakers

Under Trump, payday lenders romped through America. A lobbyist for the payday lenders became a top Trump lawyer:

https://theintercept.com/2017/11/27/white-house-memo-justifying-cfpb-takeover-was-written-by-payday-lender-attorney/

This lobbyist then oversaw Trump’s appointment of a Consumer Finance Protection Bureau boss who deregulated payday lenders, opening the door to triple digit interest rates:

https://www.latimes.com/business/lazarus/la-fi-lazarus-cfpb-payday-lenders-20180119-story.html

To justify this, the payday loan industry found corruptible academics and paid them to write papers defending payday loans as “inclusive.” These papers were secretly co-authored by payday loan industry lobbyists:

https://www.washingtonpost.com/business/2019/02/25/how-payday-lending-industry-insider-tilted-academic-research-its-favor/

Of course, Trump doesn’t read academic papers, so the payday lenders also moved their annual conference to a Trump resort, writing the President a check for $1m:

https://www.propublica.org/article/trump-inc-podcast-payday-lenders-spent-1-million-at-a-trump-resort-and-cashed-in

Biden plugged many of the cracks that Trump created in the firewalls that guard against predatory lenders. Most significantly, he moved Rohit Chopra from the FTC to the CFPB, where, as director, he has overseen a determined effort to rein in the sector. As the CFPB re-establishes regulation, the fintech industry has moved in to add “with a computer” to many regulated activities and so declare them beyond regulation.

One fintech “innovation” is the creation of a “direct to consumer Earned Wage Access” product. Earned Wage Access is just a fancy term for a program some employers offer whereby workers can get paid ahead of payday for the hours they’ve already worked. The direct-to-consumer EWA offers loans without verifying that the borrower has money coming in. Companies like Earnin claim that their faux EWA services are free, but in practice, everyone who uses the service pays for the “Lightning Speed” upsell.

Of course they do. Earnin charges sky-high interest rates and twists borrowers’ arms into leaving a “tip” for the service (yes, they expect you to tip your loan-shark!). Anyone desperate enough to pay triple-digit interest rates and tip the service for originating their loan is desperate and needs to the money now:

https://prospect.org/power/05-01-2023-fintech-ewa-payday-loan-scam/

EWA annual interest rates sit around 300%. The average EWA borrower uses the service two or three times every month. EWA CEOs and lobbyists claim that they’re banking the unbanked — but the reality is that they’re acting as sticky-fingered brokers between banks and young, poor workers, marking up traditional bank services.

This fact is rarely mentioned when EWA companies lobby state legislatures seeking to be exempted from usury rules that are supposed to curb predatory lenders. In Vermont, Earnin wants an exemption from the state’s 18% interest rate cap — remember, the true APR for EWA loans is about 300%.

In Texas, payday lenders are classed as loan brokers, not loan originators and are thus able to avoid the state’s usury caps. EWAs are lobbying the Texas legislature for further exemptions from state money-transmitter and usury limit laws, principally on the strength of the “it’s different: we do it with a computer” logic.

But as Jarod Facundo writes for The American Prospect, quoting Monica Burks from the Center for Responsible Lending, a loan is a loan even if it’s with a computer: “The industry is trying to create a new definition for what a loan is in order to exempt themselves from existing consumer protection laws… When you offer someone a portion of money on the promise that they will repay it, and often that repayment will be accompanied with fees or charges or interest, that’s what a loan is.”

Catch me on tour with Red Team Blues in Mountain View, Berkeley, Portland, Vancouver, Calgary, Toronto, DC, Gaithersburg, Oxford, Hay, Manchester, Nottingham, London, and Berlin!

[Image ID: A stately, columnated bank building, bedecked in garish payday lender signs.]

Image: Andre Carrotflower (modified) https://commons.wikimedia.org/wiki/File:30_North_%28former_Pontiac_Commercial_%26_Savings_Bank_Building%29,_Pontiac,_Michigan_-_entrance_and_Chief_Pontiac_relief_sculpture_-_20201213.jpg

Enshittification, you’ll recall, is the lifecycle of the online platform: first, the platform allocates surpluses to end-users; then, once users are locked in, those surpluses are taken away and given to business-customers. Once the advertisers, publishers, sellers, creators and performers are locked in, the surplus is clawed away from them and taken by the platforms.

https://pluralistic.net/2023/01/21/potemkin-ai/#hey-guys

Facebook is the poster-child for enshittification. When FB welcomed the general public in 2006, it sold itself as the privacy-respecting alternative to Myspace, promising users it would never harvest their data. The FB feed consisted of the posts that the people you’d followed — the people you cared about — published.

FB experienced explosive growth, thanks to two factors: “network effects” (every new user was a draw for other users who wanted to converse with them), and “switching costs” (it was practically impossible to convince all the people you wanted to hear from to leave FB, much less agree on what platform to go to next). In other words, every new user who joined FB both attracted more users, and made it harder for those users to leave.

FB attained end-user lockin and was now able to transfer users’ surpluses to business customers. First, it started aggressively spying on users and offered precision targeting at rock-bottom prices to advertisers. Second, it offered media companies “algorithmic” boosting into the feeds of users who hadn’t asked to see their posts.

Media companies that posted brief excerpts to FB, along with links to their sites on the real internet were rewarded with floods of traffic, as their posts were jammed into the eyeballs of millions of FB users who never asked to see them. Media companies and advertisers went all-in for FB, integrating FB surveillance beacons in their presence on the real internet, hiring social media specialists who’d do Platform Kremlinology in order to advise them on the best way to please The Algorithm.

Once those business customers — creators, media companies, advertisers — were locked into FB, the company harvested their surplus, too. On the ad side, FB raised rates and decreased expensive anti-fraud measures, meaning that advertisers had to pay more, even as an increasing proportion of their ads were either never served, or never seen.

With media companies and creators, FB not only stopped jamming their content in front of people who never asked to see it, they actively suppressed the spread of business users’ posts even to their own subscribers. FB required media companies to transition from excerpts to fulltext feeds, and downranked or simply blocked posts that linked back to a business user’s own site, be it a newspaper’s web presence or a creator’s crowdfunding service. Business users who wanted to reach the people who had explicitly directed FB to incorporate their media in users’ feeds had to pay to “boost” their materials.

This is the (nearly) complete enshittification cycle: having harvested the surplus from users and business customers, FB is now (badly) attempting to surf the line where nearly all the value in the service lands in its shareholders’ pockets, with just enough surplus left behind to keep end-users and business-users locked in (see also: Twitter).

There have been lots of other abusive “platform” businesses in the past — famously, 19th century railroads and their robber-baron owners were so obnoxiously abusive that they spawned the trustbusting movement, the Sherman Act, and modern competition law. Did the rail barons do enshittification, too?

Well, yes — and no. I have no doubt that robber barons would have engaged in zuckerbergian shenanigans if they could have — but here we run up against the stubborn inertness of atoms and the slippery liveliness of bits. Changing a railroad schedule to make direct connections with cities where you want to destroy a rival ferry business (or hell, laying track to those cities) is a slow proposition. Changing the content recommendation system at Facebook is something you do with a few mouse-clicks.

Which brings me to the thesis of “Twiddler”: enshittification doesn’t arise from the special genius or the unique wickedness of tech barons — rather, it’s the product of the ability to twiddle. Our discourse has focused (rightly) on the extent to which platforms are “instrumented” — that is, the degree to which they spy on and analyze their users’ conduct.

But the discussion of what the platforms do with that data — the ways they “react” to it — has echoed the platforms’ own boasts of transcendental “behavior modification” prowess (c.f. “Surveillance Capitalism”) while giving short shrift to the extremely mundane, straightforward ways that the ability to change the business-logic of a platform lets it allocate and withdraw surpluses from different kinds of users to get them on the hook, reel them in, and then skin and devour them.

The Twiddler thesis, in other words, is a counter to the narrative of Maria Farrell’s Prodigal Tech Bros, who claim that they were once evil sorcerers, but, having seen the error of their ways, vow to be good sorcerers from now on, forswearing “hacking our dopamine loops” like vampires swearing off blood:

https://conversationalist.org/2020/03/05/the-prodigal-techbro/

People who repeat the claims of Prodigal Tech Bros are engaging in criti-hype, Lee Vinsel’s term for criticism that repeats tech’s own mystical narratives of their own superhuman prowess, rather than grappling with the mundanity of doing old conjurer’s tricks very quickly, with computers:

https://sts-news.medium.com/youre-doing-it-wrong-notes-on-criticism-and-technology-hype-18b08b4307e5

That’s what twiddling is — doing the same things that grocery store monopolists and rail monopolists and music label monopolists have always done, but very quickly, with computers. Whether it’s Amazon rooking sellers and authors, or Apple and Google’s App Stores rooking app creators, or Tiktok and Youtube rooking performers, or Uber rooking drivers, the underlying pattern of surplus-harvesting is the same, and so is the method. They do the same thing as their predecessors, but very quickly, with computers.

A grocer who wants to price-gouge on eggs needs to dispatch an army of low-waged employees with pricing guns. AmazonFresh does the same thing in an eyeblink, by typing a new number into a field on a web-form and clicking submit. As is so often the case when a magic trick is laid bare, the actual mechanic is very, very boring: the way to make a nickel appear to vanish is to spend hundreds of hours practicing before a mirror while you shift so it is clenched between your fingers, and protrudes from behind your hand (sorry, spoiler alert).

The trick can be baffling and marvellous when you see it, but once you know how it’s done, it’s pretty obvious — the difference is that most sleight-of-hand artists don’t think they’re sorcerers, while plenty of tech bros believe their own press.

There’s a profound irony in twiddling’s role in enshittification: early internet scholarship rightly hailed the power of twiddling for internet users. Theorists like Aram Sinnreich described this as configurability — the ability of end-users (aided by tinkerers, small businesses, and co-ops) to modify the services they used to suit their own needs:

https://www.jstor.org/stable/j.ctt5vk8c2

Arguably the most successful configurability story is ad-blocking, which Doc Searls calls “the biggest boycott in human history.” Billions of end-users of the web have twiddled their browsers so that they aren’t tracked by ad-tech and don’t see ads:

https://blogs.harvard.edu/doc/2015/09/28/beyond-ad-blocking-the-biggest-boycott-in-human-history/

Configurability was at the heart of early hopes for mass disintermediation, because audiences and performers (or sellers and producers) could go direct to one another, assembling a customized, un-capturable conduit composed of an a-la-carte selection of payment processors, webstores, mail and web hosts, etc. Whenever one of these utilities tried to capture that relationship and harvest an unfair share of the surplus, both ends of the transaction could foil them by blocking, reverse-engineering, modding, or mashing them up, wriggling off the hook before it could set its barbs.

But — as we can all see — a funny thing happened on the way to the 21st century. The platforms seized the internet, turning it into “five giant websites, each filled with screenshots of the other four”:

https://twitter.com/tveastman/status/1069674780826071040

Three factors let them do this:

1. They were able to buy or merge with every major competitor, and where that failed them, they were able to use predatory pricing to drive competitors out of the market:

https://pluralistic.net/2023/02/16/tweedledumber/#easily-spooked

2. They were able to twiddle their services, setting them a-bristle with surveillance beacons and digital actuators that could rearrange the virtual furniture every time some knob-jockey touched their dial:

https://doctorow.medium.com/twiddler-1b5c9690cce6

3. They were able to hoard the twiddling, using laws like the DMCA, CFAA, noncompetes, trade secrecy, and other “IP” laws to control the conduct of their competitors, critics and customers:

https://locusmag.com/2020/09/cory-doctorow-ip/

That last point is very important: it’s not just that big corporations twiddle us to death — it’s that they have made it illegal for us to twiddle back. Adblocking is possible on the open web, but to ad-block your Iphone, you must first jailbreak it, which is a crime. Yes, Apple will block Facebook from spying on you — but even if you opt out of tracking, Apple still spies on you in exactly the same way Facebook did, to power their own ad-targeting business:

https://pluralistic.net/2022/11/14/luxury-surveillance/#liar-liar

This is what Jay Freeman calls “felony contempt of business-model” — the literal criminalization of configuration. When Netflix wants to decide who is and isn’t a member of your family, they just twiddle their back-end to block the child that moves back and forth between your home and your ex’s, thanks to your joint custody arrangement:

https://pluralistic.net/2023/02/02/nonbinary-families/#red-envelopes

But woe betide the parent who twiddles back to restore their child’s service, by jailbreaking an app or the W3C’s official, in-browser DRM, EME — trafficking in a tool to bypass EME and reconfigure your browser to suit your needs, rather than Netflix’s, is a felony punishable by a five-year prison sentence and a $500k fine, under Section 1201 of the DMCA:

https://www.eff.org/deeplinks/2017/09/open-letter-w3c-director-ceo-team-and-membership

This is the supreme irony of twiddling: Big Tech companies love to twiddle you, but if you touch your own knob, they call it a crime. Just as Big Tech firms turned “free software” into “open source” and then took all the software freedom for themselves, configurability is now the exclusive purview of corporations — those transhuman, immortal colony paperclip maximizers that treat humans as inconvenient gut-flora:

https://www.youtube.com/watch?app=desktop&v=vBknF2yUZZ8

If we are to take the net back, we’ll need to seize the means of computation. There are three steps to that process:

1. Traditional antitrust: Merger scrutiny, breakups, and bans on predatory pricing and other anticompetitive practices:

https://www.ftc.gov/news-events/news/press-releases/2022/01/federal-trade-commission-justice-department-seek-strengthen-enforcement-against-illegal-mergers

2. Anti-twiddling laws for businesses: A federal privacy law with a private right of action, labor protections, and other rules that take knobs away from tech platforms:

https://www.eff.org/deeplinks/2019/01/you-should-have-right-sue-companies-violate-your-privacy

3. Pro-twiddling laws for users: Interoperability (both mandatory and adversarial — AKA “Competitive Compatibility” or “comcom”):

https://pluralistic.net/2022/02/05/time-for-some-game-theory/#massholes

Monopolists and their handmaidens — witting and unwitting — want you to believe that their dominance is inevitable (shades of Thatcher’s “there is no alternative”), because the great forces of history, the technical characteristics of digital technology, and the sorcerous mind-control of dopamine-hackers.

But the reality is much more mundane. Digital freedom was never a mirage. Indeed, it is a prize of enormous value — that’s why the platforms are so intent on hoarding it all for themselves.

Here’s this week’s podcast episode:

https://craphound.com/news/2023/02/27/twiddler/

And here’s a direct link to download the MP3 (hosting courtesy of the Internet Archive ; they’ll host your media for free, forever):

TK

Here’s the direct feed to subscribe to my podcast:

http://feeds.feedburner.com/doctorow_podcast

And here’s the original “Twiddler” article on Medium:

https://doctorow.medium.com/twiddler-1b5c9690cce6

Image: Stephen Drake (modified) https://commons.wikimedia.org/wiki/File:Analog_Test_Array_modular_synth_by_sduck409.jpg

CC BY 2.0 https://creativecommons.org/licenses/by/2.0/deed.en

This Thu (Mar 2) I’ll be in Brussels for Antitrust, Regulation and the Political Economy, along with a who’s-who of European and US trustbusters. It’s livestreamed, and both in-person and virtual attendance are free. On Fri (Mar 3), I’ll be in Graz for the Elevate Festival.