CNN: The IPO that Swallowed Facebook

(CNN) -- Facebook advocates are touting the company's initial public offering this week -- the biggest ever for an Internet company-- as if it will save the net, the economy and the American way. Its detractors see the final chapter in the rise and fall of a smart but solipsistic Harvard dropout, and predict the inevitable decline of Facebook's stock will spell the end to innovation in social media. Internet Bubble 2.0.

Of course, none of this is true. Such hyperbole is more about our traditional media's need for simple stories than anything happening at Facebook or on Wall Street. These are the judgments of financial analysts who don't even know what API stands for (application program interface), and technology analysts who never heard of the Greenshoe option (the provision for an underwriter to oversell).

This factless speculation, combined with the risk-off jitters of the greater markets, has led to the conflation of stock value with business, and one social media company with the future of the net. If the dot.com bubble and more recent stock market crash should have taught us anything, it's that stock prices have been uncoupled from business profitability, which has in turn been uncoupled from value creation.

Facebook can still be one of the most successful and significant companies of the past 100 years without being nearly worth an IPO valuation of $100 billion. Meanwhile, traders buying stock at that valuation can still make billions more over the next hours or days, even if the stock then plummets or slowly peters out. Likewise, Facebook can shoot to a sustained stock market success even without showing a reasonable profit for many years. Finally, Facebook can become the biggest stock market and business loser since Lucent (who?) without taking the Internet or social media down with it.

So to start, let's look at the IPO in isolation. Is Facebook worth the $96 billion reportedly implied by IPO valuation? Not at the moment. Facebook's profits are down since last year, its membership growth is stagnating and the online advertising market is softening. This IPO comes at a later than ideal time, as the potential trajectory for the company no longer seems infinite.

Does that mean you shouldn't buy the stock on opening day? Of course not. The price of Facebook shares will have nothing to do with the reality on the ground (or online). Everyone wants in, demand is outstripping supply, and the hunger for shares could push the price very high in the short term. None of this has anything to do with social media, it's just gambling.

It's also possible that even the craziest speculators are still undervaluing Facebook's ultimate worth. That's where a media theorist like me can venture an opinion -- and I'd have to say no, they're not. Facebook is certainly the best of the social media apps to come along, just as Google was the best search engine. Similarly, however, the social media playpen constituted by Facebook is temporary. Just as we are moving away from Web search into a world of applications running on smartphones, we will move away from our single Web-based social media platform toward more ad-hoc social apps on our handheld devices.

It's hard for us to imagine right now, but we won't be logging into Facebook to find out what's going on; we'll work and play in an ecology of apps that tell us where people are and what they are doing.

Yes, Facebook may have a role in that next-generation social media universe, but it will need what tech industry people like to call "a second act." Apple's second act is the iPhone. Google is hoping for "augmented reality" eyeglasses and network-controlled automobiles.

Facebook's second act is far from clear. It wants to become the platform on which everybody else builds social media apps. But if all this activity is happening on smartphones, then Facebook is dangerously dependent on Android and iPhone for everything, a layer on top of Apple and Google's systems. Facebook's inability to generate income on the smartphone has led to some desperate moves, such as its billion-dollar acquisition of photo-sharing app Instagram and off-putting products like "sponsored stories."

So far, love him or hate him, Facebook creator Mark Zuckerberg has been consistent with his vision of building a more social Web: a peer-to-peer communications infrastructure that changes the way people connect, share ideas and sell things. The more comingled his mission becomes with the priorities of Wall Street, the less freedom he will have to challenge the status quo.

The Facebook IPO itself, for instance, is being conducted in the most traditional fashion possible, with underwriters establishing a price and offering shares through brokerage houses. Compare this to Google, who let the public establish the share price through open bidding, mirroring the company's revolutionary, bottom-up search algorithm, and challenging underwriters with net democracy.

The most radical thing Zuckerberg has done so far is attend investor meetings in a hoodie -- as if to say, "in your face." Cute, but it hardly asserts innovation in the face of profiteering, or social networking in the face of the corporate capitalism.

This is a week when the stock markets are particularly vulnerable to a new message. The CEO of Yahoo is resigning after a controversy over resume padding, while executives at JP Morgan Chase are falling on their swords for losing so much money, so quickly, that they may change the regulatory landscape for their entire industry. People are ready to embrace a new way of playing this tired game.

By jumping headfirst into the stock market, Facebook may be joining a zero-sum shell game at just the wrong "risk off" moment. If Facebook does succeed in the stock market this week, then it will do so at the expense of Groupon, Apple and Google, whose net-fetishizing investors will likely be selling those shares in order to buy the new ones from Facebook. Worse, by joining in the speculative economy on Wall Street's terms, a company that might have changed business instead subjects itself to forces far beyond its control.

Rushkoff Keynote at Rhizome's 7 on 7 Festival

Here's a very brief - 15-minute - keynote about the changing relationship of artist and technologist, delivered at the NewMusuem on April 14 for Rhizome's 7 on 7 festival.

Seven on Seven 2012: Keynote by Douglas Rushkoff from Rhizome on Vimeo.

My Preface to Boorstin's <i>The Image</i>

The new edition of Boorstin's classic book on media and culture, The Image, has just been released from Vintage. I had the honor of writing a new afterword to the text. 

The first edition of The Image was published in 1961, the same year I was born. Kennedy was yet to be assassinated, LSD was yet to reach Harvard University, and the French post-modernists were yet to begin their deconstruction of America’s television-driven culture. 

Ironically perhaps, like most readers coming to the book today, my main access to the sensibility of this era comes from television shows such as MadMen which, for all their slick characters, cigarette smoking, and cynical dialogue, actually depict a kind of innocence: the last moment in our history before the images created on Madison Avenue overtook reality. From our current perspective within the chaos of the Twittersphere, the discussions between admen about what slogans might best sell pantyhose seem almost quaint. Though rather devious in its intent, there was an art to the manufacturing of images that could touch the untapped recesses of human psychology. This was a craft that could be mastered by one set of human beings to influence the behaviors of another.  

Our widespread fascination with this era - with its styles, appliances, and values - points to our own sense that something was lost back there. Yes, the seamless American narrative was to be irreparably interrupted by a series of brutal assassinations, the Vietnam War, and Kent State. But reaching back just a bit further than this, to the landscape of PanAm, the Worlds Fair, and the Dick Van Dyke Show, we find an America already in transition from one culture into another. We went from what Boorstin would consider the world of language and text to the world of the image. 

A conservative at heart, Boorstin saw this as a shift away from thought and consideration to one of instantaneous assumption. While words take time to utter and hear, the image is frozen in time - its impact immediate, and its influence decadent. Before the primacy of the image, a salesman would have to describe the attributes of a product in a rational appeal to the intellect. Afterwards, it was the mythology of the brand, usually concocted by psychologists, that would sway a consumer’s heart. Likewise, the policy platform of a presidential candidate would come to matter less than the ability of his image to convey ineffable or irrelevant values. 

Of course, the rise of the image ultimately served the left and liberal no better than it did the right and conservative. Reagan would come to depend even more intentionally on the symbolic language of visual imagery as Kennedy, and modern conservatives would exploit the thought-quelling immediacy of television as well as any liberal democrat. 

Where Boorstin proved the most prophetic and relevant to our age, however, is the extent to which created imagery would be able to supplant reality itself. In a process he saw just beginning in his own time, the imagery we created and the media we used to disseminate them were taking on a life of their own. That’s why the era of the MadMen is so intriguing, even nostalgic for us today. There were still human beings utilizing their creativity. The MadMen were actively concocting the logos of banks, the brand myths of soaps, and the characters on cereal boxes. However manipulative the intentions of such image factories, there was a creative innocence fueling all this cultural production and reproduction. The magic of color TV was as spectacular as the race into space. 

But as Boorstin had begun to observe, the novelty of television was soon superseded by its ubiquity. The hypnotic lure of these simulated realities became the seamless wash of Muzak and strip malls. Innocence and awe gave way to sensory overload and unconsciousness. As Baudrillard would later explain, we lost touch with any of the creative origins of these media as the simulations they rendered became the new reality. 

The first symptoms of this culture-wide disconnect appeared to Boorstin as the precursors to a much greater disease. Unlike Marshall McLuhan, who would later codify these changes in less judgmental terms such “hot and cool,” or “obsolescence and retrieval,” Boorstin made no secret of his concern and disdain for the direction in which the American experience and its discourse were going. 

Most famously, he coined the term “pseudo-event” as a way to describe the public relations driven, over-dramatized media moment. He saw events and ideas enjoying dissemination and attention based on little more than their appropriateness to a sensationalist media. These synthetic events distracted us from the issues that mattered, and recast everything in the language of image. He feared presidential debates becoming too much like quiz shows, and coverage drifting from issues that matter to discussions of the candidates’ television performances. The pseudo-event highlights only pseudo-qualifications. 

He worried about the tendency of Hollywood to recycle the stories of novels, creating the illusion that the forms were interchangeable and that people could truly get the gist of a book simply by seeing the movie. (We can only wonder what might Boorstin say of today’s college students who get the “gist” of Hamlet by reading a two-paragraph summary on SparkNotes.com?) And while movies are capable of representing panoramic sweeps and many kinds of spectacle, they are generally limited to speaking out on issues. Novels, on the other hand, by engaging with individual readers’ minds over longer periods of time, have the ability to “speak in” and address a more interior drama. In a world dominated by the image instead of the word, interior life gives way to exterior show. Substance gives way to simulation. 

Pseudo-events, in turn, give rise to a new kind of celebrity: people who are famous for being famous. Boorstin was thinking of the Hollywood star system, how it manufactured “types” whose very casting in a part communicated pretty much everything one needed to know about the character. But he was also getting at least a vague premonition of today’s “reality” television, where any sort of talent is not only superfluous, but actually a hindrance. The kids on MTV’s Real World, for example, excel most for their ability to behave like “real world” castmembers. The Real World season, like that of any other reality show, is itself a pseudo-event, absolutely manufactured and all the more successful for its refusal to do anything other than be itself.

On such a pseudo-stage, celebrity becomes not just what Boorstin called a “self-fulfilling prophecy,” but a self-referential vacuum. The purity of celebrities is measured and confirmed through their ability to prove their incompetence in all real things. Paris Hilton, for example, is famous precisely because she is not qualified to do anything other than be famous. Her hit reality TV series followed her and her friend through America as they failed at doing basic tasks, either through laziness or incompetence. Likewise, Charlie Sheen reaches the highpoint of his own celebrity not by performing well on his television sit-com, but by sharing his manic delirium with the world through social media. Even his fictional television role was more of a tongue-in-cheek comment on his pseudo-event real-life debauchery than an acting performance. 

Although Boorstin predated the net, he did foresee the direction in which we were going, and longed to alert us to both the humanity and intellect we would be destined to leave behind and as we leaped headlong in a world of image. What he may not have realized, however, is the extent to which the emergence of peer-to-peer networking technologies might eventually challenge the preeminence of the image factory from which he recoiled. By making images for one another instead of just consuming those of corporate America, we could begin to reverse the process through which we are, in Boorstin’s words, being “programmed” by advertisers.  

He also seemed somewhat oblivious to the role of the market economy in fueling all this image-making and meaning-taking. As we understand now, media does not act independently of other social institutions, but as part of a greater ecology of forces and technologies. Television did not cause the pseudo-event any more than Facebook caused Arab Spring - even though the biases of these media types were certainly contributive to kinds of outcomes they yielded. 

In the case of America in 1962, corporate capitalism was understood as a given. The only question at the time was what might be the best method for promoting its values and products to America. The MadMen of Madison Avenue believed they could create a mythical landscape in which brands and consumption would feed both our corporate coffers and our unconscious desires. Boorstin saw such efforts as not only dangerous, but also an admission of defeat. Why do we need the lies of an advertising industry unless we are covering something up? By surrendering to the disingenuous image-maker, we were acting as if we had something to hide. In hindsight, perhaps we did. 

Whether or not a truer American dream may have been realized without the manipulations of the advertising industry, there is little doubt that we descended into a dream nonetheless. It was a dream we built ourselves in a spirit of optimism and infinite possibility, from Detroit to Levittown, in offices and bedrooms furnished by Eames and Heywood-Wakefield, and televised by NBC and Philco.  

If we are inclined look back at that era with fascination and longing, it may be less for the mid-century furniture and fashions than to comprehend the consciousness with which they were created and used. Those last wonderful moments before we drifted off to sleep. 

This book is one of the clearest missives we have from the other side of that dream. It was a dream into which Boorstin saw us drifting, and a dream from which he was imploring us to wake up. By reckoning with this analysis of how we were lulled to sleep, we may finally stand a chance of rousing ourselves into consciousness again. 

Douglas Rushkoff

Hastings on Hudson, 2011

Motherboard TV: Douglas Rushkoff in Real Life

Via Motherboard.TV



For someone who likes to talk about the virtues of disconnecting, the media critic Douglas Rushkoff seems surprisingly always on. When I visited him at his storefront office near his home in Hastings on Hudson, New York, he was preparing to teach a new class, getting ready for a BBC interview, writing an essay, staring down a pile of articles to read, trying to figure out his new iPhone, and hurrying to finish his third book in three years – a graphic novel called ADD, which revolves around gaming culture, celebrity and the pharmaceutical industry. “It also asks the question,” he says, “what if attention deficit disorder weren’t a bug, but a feature?”

The hyper-speed hyperlinked life is familiar ground for Rushkoff, whose first book Cyberia, made him a popular tour guide to the Internet in the early 1990s, and an early prognosticator of its radical potential. But much has changed between the awkward days of “the ’Net” – then a non-commercial collection of public networks, accessed by local ISPs – and the overloaded era of Facebook, YouTube and iPhones. If Rushkoff is well versed in the language underneath the “digital revolution,” he’s also become one of its most outspoken critics.

“A society that looked at the Internet as a path toward highly articulated connections and new methods of creating meaning is instead finding itself disconnected, denied deep thinking, and drained of enduring values,” Rushkoff writes in 2010’s Program or Be Programmed. His remedy is simple, if ambitious: once people begin to understand how software works, “they start to recognize the programs at play everywhere else – from the economy and education to politics and government…All systems have embedded purposes. The less we recognize them, the more we mistake them for given circumstances."

Understanding how things work In order to make them work better is the basic hacker ethos, but Rushkoff has applied it to his broader discussion of the way the culture and politics of the many are driven by the interests of the few. Between his landmark Frontline documentary The Merchants of Cool to his recent book Life Inc., Rushkoff has indexed the risks that capitalism and corporate influence pose to democratic society. Or, to extend the metaphor, he’s sought to show how we the users routinely get screwed by an “operating system” that’s over 500 years old.

“We’re leveraged in so many ways, it’s like, our economy is leveraged to produce more than it can in order for it to survive,” he says. “It’s leveraged to grow. Human beings are financially leveraged now. So how do you roll that back and say, well, you know, ‘this is it’?” Or, rather, “How do you get the good of a zombie apocalypse without the zombies? That’s sort of what I’m trying to help people with.”

Enter Occupy. Rushkoff has watched the movement with cautious optimism, penning editorials on CNN and organizing November’s Contact Con, a powwow of net roots activists and open source hackers working to foster new civic-minded apps and hardware. To include prizes, Rushkoff enlisted the help of Pepsi, which ultimately granted $10,000 to the Free Network Foundation, which was profiled in our recent documentary.

Rather than shun corporate sponsors, Rushkoff revels in what they bring to the table, and in the contradictions of the movement. Occupy’s power, ultimately, is its meme — the idea that a citizenry can not only protest the system but demonstrate a new way of responding to it and reworking it. Like his call to program, Occupy’s nebulous mission may be hard to swallow or carry out. But that also lends it its own kind of power, he says. Its radical promise isn’t unlike the earlier Internet’s: a distributed and open system that could change civic discourse and remake culture.

But as on the strange battlefield of the Internet, Occupy could also crash against its own giant ambitions, which will be heavily tested in the next few months, starting with next week’s “general strike”. Progress will have to be made gradually, says Rushkoff. “There are ways to slowly move towards a sustainable life path, and it’s just a matter of doing that, and I’m hoping that more people in Occupy start seeing it that way – in that more subtle way, rather than exclusively in the kind of activist, let’s-get-pepper-sprayed by cops way.”

Much has changed in the decades since Rushkoff started critiquing the system. But his philosophy is still animated by a big question, one that applies not only to the digital spaces of the Internet, built by the Facebooks and the Googles, but to other kinds of “public” spaces too, in town squares, Congress, and culture: who programmed these spaces, and to what ends, and how can they be hacked into something better?

Technology, Art, and Why the Future of Branding is Nonfiction

Via Fast Company.

Ahead of his appearance at the art/tech event, Rhizome Seven on Seven, Douglas Rushkoff talks to us about the changing role of artists and technologists and how brands can no longer be abstract.

By Jim Hanas

Author and futurist Douglas Rushkoff--in his books or, in this case, via Skype--is frequently the voice of unconventional wisdom. He has argued, for example, that employment is an obsolete economic indicator and, though he has long been a tech enthusiast, his latest book--Program or Be Programmed--is a technological cautionary tale. There he argues, via “Ten Commands for a Digital Age,” that the technology that takes up more and more of our lives comes with built-in biases--toward simplification of complex issues, for example, and toward anonymity--and that in order to counteract these biases, we should learn how our programs work. We should all become programmers, in other words, a process Rushkoff now admits could be “harder than I might have made it sound, especially for an adult. It’s certainly as hard as learning Portuguese.”

Next Saturday, April 14, at New York’s New Museum, he will deliver the keynote at the Rhizome Seven on Seven Conference, which pairs noted artists and technologists together and challenges them to develop a project in just 24 hours.

We asked Rushkoff some questions about Rhizome, branding, and the future of marketing. As you might expect, some of his answers are unconventional.

CO.CREATE: What is your keynote going to be about?

DOUGLAS RUSHKOFF: I think what I’m going to talk about is the history of the relationship of artsy to techy people, and how I feel like it’s reversed over the last 20 years. The artsiest people went into technology and it feels now like--especially when I go someplace like Rhizome and see these partnerships between technology people and arts people--that the arts people are the nerds. The technology people are the people coming up with wild ideas and going forward and building them and the arts people are the ones who say, “This is a sort of Schopenhauer-influenced post-modern blah, blah, blah.” They’re the ones creating the documentation and the historical framework around projects that are pure imagination. So it looks to me like the nature of the partnerships between artists and technology people are the opposite of what they might have been back in the day, where the art boys were the crazy, wild people, pairing up with nerds to sort of envision this technological future. And now it’s wild-eyed technologists pairing up with educated, almost PhD-like artists, in order to contextualize what they’re doing more responsibly.

In your book, you argue that brands were necessary fictions that no longer make sense. What does that mean for the brand discourse that is so prevalent today?

It means people shifting their understanding of brand. Brand always had two functions. One of its functions was to mask the long-distance industrial-age reality behind a product because people’s personal relationships with producers were being replaced by the plain, brown-box relationship to mass-produced goods. That was one function: to humanize factory products.

The other function of the brand, though, was to create accountability. The difference between a branded product and an unbranded one, was a branded one, you knew who you could go to. They’re there. It’s their way of owning the product, both in the bad kind of way and the good way. We’re standing behind this. So the we’re-standing-behind-this aspect of branding I think still holds.

Every company has a social media strategy whether they know it or not

[But] it’s not about creating a mythology around the way a product was created, so it’s no longer “these were cookies made by elves in a hollow tree.” That’s not the value of the brand. The value of the brand is where did this actually come from? What’s in this cookie? Who made it? Are Malaysian children losing their fingers in the cookie press or is this being made by happy cookie culture people? At that point, all these companies come to people like me saying, “We want to become transparent. We want a transparent communication strategy.” And I’m like “Well, are you proud of what’s going on inside your company? Are you proud enough to pull up the shades and let people see inside?” It’s that easy.

Every company has a social media strategy whether they know it or not. You can have your dedicated social media person chasing down consumer complaints, but your real social media strategy is how are the people who work at your company and the people who buy from your company and people who supply to your company, how are they talking about you in social media? The way to make them talk about you [favorably] is by walking the walk of the thing that you do. And that’s so hard for so many of these companies because they’ve become so abstracted. They’ve become so distanced from the core competence of their industry. The job of a communicator--or someone like me--is to go in and say, well, just do something. Don’t outsource one thing and then make your company about that.”

What will marketing organizations look like in the future?

It will be companies that figure out how to communicate the non-fiction story of a company, so it’s going to look a lot more like a communications company than a creative branding agency. It’s going to look a little bit more like PR, in some sense. It’s going to be people who go and figure out what does your company do and how do we let the world know about that? There’s going to be a lot of psychology involved, except instead of it being psychologists turned against the consumer, it’s going to be psychologists going in and trying to convince companies that what they’re doing is worthy. It’s breaking down this false need in companies to hide from the public what they’re doing--except for the ones that do (need to hide).

The thesis of your book is that digital technology has built-in biases that limit choices and discard information. Do you think exercises like Seven on Seven can serve to overcome, or at least reveal some, of these limitations?

I think the artist, even more than government, has become the one who is doing long-term thinking about what’s happening, what are the implications, what are we doing to ourselves? And they’re some of the only ones, really. An artist’s job is to sit outside what’s happening and reflect back to us where the human is in this. I think it’s a very valuable exercise. It’s just the opposite exercise of what most people probably think it is. It’s not for technologists to realize the visions of artists. It feels much more like it’s for artists to contextualize the visions of technologists.