Capitalism’s AlibabaMad Men

Don Draper stares at the menacing IBM360, a massive room-filling monstrosity, bringing as much fear and loathing as a real beast of violence might elicit. He menacingly mumbles to the new-tech salesman “I know what your game is..the best game since the beginning of time”. Despite being slightly (errrm..yeah..only slightly Don) inebriated and worse for wear..it was the 60s in NYC after-all..the scene depicted is quite telling given the latest tech revolution (now Alibaba’s announcement of what may be the world’s largest ever IPO) and talk once more of inequality in the capitalist world, as exemplified in the widely-reviewed and variously digested “Capitalism In the 21st Century” by Thomas Pikkety. The only thing more surprising that the economics tome tops Amazon.com’s bestsellers list, that the author of the book half the US is devouring is..French! Oh la la…What about those freedom fries now huh all you swooning intellectuals in Boston? Seems we are more egalité when times are tough. So what do Mad Men’s protagonist Don Draper, Monsieur Pikkety and Alibaba have in common that we might extrapolate from? Let’s find out…

I’m not going to pretend I have read Pikkety’s book yet (I doubt most of those ranting and raving on the net in either support or opposition have done so either) but the general message is that return on capital has outstripped economic growth in the last few years to such an extent that the level of inequality we have reached is again closer to the point of pre-war haves and have nots (the Economist has a great “pretend like you’ve read it” article for most to content themselves with). These are of course themes that have been discussed on this very blog in many shapes and forms and it is intriguingly a sign-of-our-times to see such an economics book that doesn’t glorify drug-dealing statistics for the benefit of hype (you know who you are Freakonomics guys) rise to the very top of the Bestseller list. Where did it all start and how have the “haves” accumulated such capital prowess in the first instance? One must extrapolate that in times of harsh post-war rebuilding, those that have moved the fastest and accumulated the most (like savvy land-buyers in bombed out Central London in 1947) then profit handsomely when the next downturn occurs – paradoxical to the masses but a trait of unequal growth and sheer expression of the old-age business lesson rich grandparents preach by the fireside “buy land and own things”.

Don’s point in the latest episode of Mad Men - a fantastic series that provides a window to the past, allowing us to explore what has brought us to this particular consumption-age through the psychological evolution of advertising..at one point he is asked..”does advertising work?” his reply..”on some people”…surely outdated now given most tech-firm’s valuations and other media-conglomerates are based on little more than potential advertising revenue..it works on ALL of us - is the replacement of people and human thinking by machines. A powerful message when we analyse the incredible revolution of what has essentially been psychological warfare by the increasingly tech-ed up and analytical advertising world. We have not quite yet neared the realms of such insightful and thought-provoking movies exploring the worlds of self-aware (hence autonomous thinking) machines such as “Her’, however there are now swelling indications of a new generation advancing stage of the tech-revolution, with the rise of problem-solving machines and the cutting-edge industrial revolution of 3D Printing – sitting at home and ordering up a new pair of sneakers from Alibaba will mean literally having them “glued together” by a whizzing machine sitting on your desktop – wrong size sir? Let’s make it again..instantly. 

What would that mean for the last 50 years of progress the developing world has enjoyed through the out-sourcing of labour intensive manufacturing processes to feed the rich-world’s consumption glut? Entire new industries will have to be invented to digest surplus manpower the world will experience. A new paradigm begins.

Nuggets of wisdom can be found in the most obscure (not to mention entertaining) places. Would it be too much of a stretch to suggest that the constant desire and want of consumerism whipped up by the deluge of manipulative advertising/branding has significantly contributed to the capitalist world that Pikkety suggests must be taxed in almost punitive measure? When you analyse the proportion of spend by the have-nots on non-essential products (i.e. luxury items), a picture of the masses giving to the few that control those very products adds to the re-allocation of wealth - booms in real-estate and other outsized capital generating assets are supported by the decline of labour intensive industries replaced by the humble computer - machines allow the few to do the work of many..the few end up earning more and the many are left to struggle as the few grow and grow. Seems if you miss out on this evolutionary tract at an early stage, there exists little hope of catching-up.

Unless you are the founder of Alibaba that is. A humble teacher, Jack Ma first saw a computer in 1995 when visiting Seattle and after experiencing the pleasures of going “online” (one wonders what his first page visits where?!) Jack returned to China, where - luckily for him and a few other soon to be multi-billionaires (Japan’s Softbank too…in a rare example of Sino-Japan mingling) – he mimicked the best of what the West had to offer in this new online world for his own China backyard. It is a classic example of a regional need being filled by a savvy entrepreneur in the right place at the right time. Jack is a thinking man’s philanthropic billionaire at least, already pledging to give away half his fortune before it has even been monetised. It is also a frighteningly exhilarating example of the growth of the tech-industry amidst the world’s most populous nation. 

Even Alibaba only has one-third of China’s population as its client base (c.250m at last count) for now, yet that number is larger than its top-three major rivals combined in the West. The immensity of the rise of the machine in a nation where most still live off the land is the surest sign of Pikkety’s worry of inequality. It seems those moving onwards are benefiting from outsized returns in all shapes and sizes. Mobile commerce is the next big thing in China. Where once Jack Ma had to look to Seattle for ideas to kick-start his own empire, we will likely soon be replicating in London, Paris and New York whatever Alibaba’s mobile platform innovates. Hold on though, where does Alibaba makes most of its revenues from? Yep..you guessed it..from Don Draper’s wonderfully sharp, subconsciously alluring advertising brilliance.

What of the danger of sensationalism and the herding mentality?  We all know that crowds can cause strange and abnormal behaviour. Everyone reading the same thing and being taken in by one line that the world’s rich are too evily rich and must be taxed to hell, is itself a dangerous development if not correctly measured. With the age of instant-viral, misunderstandings of the current economic environment may have significant (unforeseen and mostly unintended) consequences akin to Karl Marx’s publication of his own seminal work on capitalism. One aspect of Pikkety’s book that is not covered alas, is the correlation between war and inequality. Again, this worrying link has been discussed by the more astute since the first signs of the economic meltdown in 2008. We have witnessed the warning signals; Arab Spring, African tensions, increasing city riots and returning nationalistic tendencies a la Putin. Periods of massive inequality in the recent past led to two world-wars..further back we’ve seen countless clashes befalling empires from ancient China to Persia and even the demise of the Roman empire came at a peek of social inequality, despite its still unrivalled military might…did the rich simply become toooo rich?

Let’s hope most take a note out of Don’s advertising book and like he, when his creative thinking room is reconstructed for the IBM360, rather than let the pressure get to him and fight the advance, decide to pop out for a “working lunch” at 11.15am.