Algorithmic Trading and Cloud Capitalism
The report of the staffs of the Commodity Futures Trading Commission and Securities and Exchange Commission to the Joint Advisory Committee on Emerging Regulatory Issues “Findings Regarding the Market Events of May 6, 2010”(1) provided a compelling account of that turbulent day:
“At 2:32 p.m., against this backdrop of unusually high volatility and thinning liquidity, a large fundamental5 trader (a mutual fund complex) initiated a sell program to sell a total of 75,000 E- Mini contracts (valued at approximately $4.1 billion) as a hedge to an existing equity position (p. 2). The report indicates that liquidity crises ensued because a large trader used an automated execution algorithm (‘Sell Algorithm’) that was programmed to trade large volume (E-Mini contracts) with regard only to volume rather than price or time and the Sell Algorithm was executed rapidly in the period of twenty minutes resulting in one the three largest single-day price movements in the history of the stock market. Under the heading ‘Lesson Learned’ the Report suggests that ‘under stressed market conditions, the automated execution of a large sell order can trigger extreme price movements, especially if the automated execution algorithm does not take prices into account. Moreover, the interaction between automated execution programs and algorithmic trading strategies can quickly erode liquidity and result in disorderly markets.'”
Algorithmic capitalism and its dominance of the market increasingly across all asset classes has truly arrived. It is an aspect of informationalism (informational capitalism) or “cybernetic capitalism,” a term that recognizes more precisely the cybernetic systems similarities among various sectors of the post-industrial capitalist economy in its third phase of development – from mercantilism, industrialism to cybernetics – linking the growth of the multinational info-utilities (e.g., Goggle, Microsoft, Amazon) and their spectacular growth in the last twenty years, with developments in biocapitalism and the informatization of biology, and fundamental changes taking place with algorithmic trading and the development of so-called financialization.
Cybernetic capitalism is a system that has been shaped by the forces of formalization, mathematization and aestheticization beginning in the early 20th century and associated with developments in mathematical theory, logic, physics, biology and information theory. Its new forms now exhibit themselves in finance capitalism, informationalism, knowledge capitalism and the learning economy with incipient nodal developments associated with the creative and open knowledge (and science) economies, creating large-scale monopolies in the knowledge economy, on a vastly larger scale than anything imagined possible in the industrial era, such as Google’s project of digitizing millions of books that will make its digital library bigger than the Library of Congress. Charles Leadbeater (2010) argues, “Google will acquire huge power over the future of publishing. It will be able to head off potential competition from other databases of digital books.” As he goes on to explain: “Google is the first and most successful exponent of a new kind of economic power: cloud capitalism.”
This paper provides a brief review of algorithmic capitalism to investigate the new logic of social media and the “Googlization” of education.
The New Logic and Culture of Social Media(2)
Facebook was launched in 2004 as a social network service. It is estimated that over 40 percent of the US population has a Facebook account and that, in one month in October 2010, Facebook had over 135 million unique visitors. Facebook has more than 845 million active users as of early 2012. Its value has been estimated to be $41 billion, and it has become the third-largest US web company after Google and Amazon. Along with Microsoft and eBay, these web companies increasingly define the new landscape of cybernetic capitalism. Facebook employs some 1,700 people in twelve countries and heads the list of over 200 social networking sites (excluding online dating web sites).(3) The focus of these social networks runs across the spectrum of social activities: web sites for sports, gaming, nationalities, ethnic groups, mothers, African-Americans, green and social activists, investment groups, communities, sex groups, photo-sharing, movies, colleges and schools, religious-based groups, alumni associations, charity, travel, and so on. Indeed, a list of social networking sites reveals well over 200 social networking sites(4) with some established as early as 1995 predating the establishment of Facebook by almost a decade. Many, like Academia.edu, Classmates.com, TeachStreet, Tuenti, and LinkedIn are specifically professional and educational sites; others focus on business.
In “An Anthropological Introduction to YouTube” Michael Wesch (2008) indicated that YouTube produced more hours of broadcasting in six months than ABC has since it began broadcasting in 1948, that is, YouTube adds 9,232 hours every day, the equivalent of 200,000 three-minute videos, without producers, and most of the material is new.(5) YouTube was launched in 2005. Wesch (2007) in his video “Web 2.0 … The Machine is Using Us”(6) argues the Web “is no longer just about information; it’s about connecting people” and user-generated organization, distribution and commentary (blogging) of material so that we are living in a whole different mediascape based on the understanding that media means mediating human relationships, not content, especially among the 18-24 age group, which is emblematic of a “participatory culture” of drag-and-drop editing, and remixing, sometimes as many as 2,000 times.
The language of the new social media is easily programmable given its algorithmic character and its numerical coding allows for the automation of many of its functions including media creation. New media are variable and interactive and no longer tied to technologies of exact reproduction such as copying (Manovitch, 2000). They are part of a wider paradigm and system that Castells (2000) calls “informational capitalism,” which is a new technological paradigm and mode of development characterized by information generation, processing and transmission that have become the fundamental sources of productivity and power. More and more of this information that is the raw material of knowledge capitalism is increasingly either image-based or comes to us in the form of images. We now live in a socially networked universe in which the material conditions for the formation, circulation and utilization of knowledge and learning are rapidly changing from an industrial to information- and media-based economy. Increasingly the emphasis has fallen on knowledge, learning and media systems and networks that depend upon the acquisition of new skills of image manipulation and understanding – skills like image cropping and enhancement, insertion and overlay, photo editing and image manipulation software, size alteration and perspective control – as a central aspect of development considered in personal, community, regional, national and global contexts.(7)
Jonathan Beller (2006) argues that cinema and other media formations including the Internet as media platform, are deterritorialized factories in which spectators works or perform value-productive labor. The cinematic mode of production (CMP) is an exploitation of the sociality that characterizes a spectator economy. The question is whether we have already moved beyond spectatorship and the spectator economy to one now centered on new social media and a social mode of production that requires collaboration and co-creation as a matter of participation and entry.
The Googlization of Education
In “The Googlization of Universities” Siva Vaidhyanathan (2009) began:
The relationship between Google and the world’s universities is more than close. It is uncomfortably familial. Google has moved to establish, embellish, or replace many core university services such as library databases, search interfaces, and e-mail servers. Its server space and computing power opened up new avenues for academic research. Google Scholar has allowed non-scholars to discover academic research. Google Book Search radically transformed the vision and daily practices of university libraries. Through its voracious efforts to include more of everything under its brand, Google fostered a more seamless, democratized, global, cosmopolitan information ecosystem. But it also contributed to the commercialization of higher education and the erosion of standards of information quality.
He documents the Googlization of students, of scholarship, of book learning and of research to argue that universities must reverse the terms of the relationship to impose their values. It’s a theme that Vaidhyanathan (2011) follows up with “The Googlization of Everything” that addresses three questions: What does the world look like through the lens of Google? How is Google’s ubiquity affecting the production and dissemination of knowledge? How has the corporation altered the rules and practices that govern other companies, institutions, and states? He wrote:
Google dominates the World Wide Web. There was never an election to determine the Web’s rulers. No state appointed Google its proxy, its proconsul, or viceroy. Google just stepped into the void when no other authority was willing or able to make the Web stable, usable, and trustworthy. This was a quite necessary step at the time. The question is whether Google’s dominance is the best situation for the future of our information ecosystem.
Vaidhyanathan (2011) argued that Google is a web search-engine service, “But as the most successful supplier of Web-based advertising, Google is now an advertising company first and foremost.” He suggested that, currently, major search engines do not “read” for meaning, they are purely navigational and while the industry pursues semantic search which takes into account contextual meanings of search items, semantic analysis is still not advanced enough to take away Google’s market position. One of the most significant arguments against Google is what economist call the free rider problem and Vaidhyanathan (2011) claimed that Google rides for free on the creative work and investment of others; he reported that even Rupert Murdoch has complained of Google’s ability to monetize the web. And he also mentioned the political interference of YouTube since its acquisition in 2006.
Perhaps most tellingly, Vaidhyanathan (2011) challenge the neoliberal presumption that market forces can best solve problems and suggested:
It had its roots in two prominent ideologies: techno-fundamentalism, an optimistic belief in the power of technology to solve problems … and market fundamentalism, the notion that most problems are better (at least more efficiently) solved by the actions of private parties rather than by state oversight or investment.
Vaidhyanathan’s argument here is one ultimately against neoliberalism in relation to global public knowledge goods, but the theory of cognitive capitalism provides us with a “stage” theory of the changing nature of capitalism that helps us better to understand the logic of knowledge capitalism that operates on the basis of algorithmic logic to expand a universe of information accessibility while changing the nature of the regime of accumulation. All the while, knowledge capitalism also creates giant global info-utilities that make its profits on the backs of the creative endeavors of others while posing as corporation dedicated to the commonweal.
Educational futures require a global transnational public investment in infrastructures that stand against both the monopolization and privatization of knowledge and education.
Beller, Jonathan (2006), “The Cinematic Mode of Production,” Dartmouth: University Press of New England.
Vaidhyanathan, S. (2009), “The Googlization of Universities.”
Vaidhyanathan, S. (2011) “The Googlization of Everything (And Why We Should Worry),” Berkeley, University of California Press.
“Imagination: Three Models of Imagination in the Age of the Knowledge Economy,” By Peter Murphy, Michael A. Peters, Simon Marginson.
1. See here. Release September 30, 2010.
3. See the full list here.
5. See here.
6. See here.
7. See here.
The stakes have never been higher (and our need for your support has never been greater).
For over two decades, Truthout’s journalists have worked tirelessly to give our readers the news they need to understand and take action in an increasingly complex world. At a time when we should be reaching even more people, big tech has suppressed independent news in their algorithms and drastically reduced our traffic. Less traffic this year has meant a sharp decline in donations.
The fact that you’re reading this message gives us hope for Truthout’s future and the future of democracy. As we cover the news of today and look to the near and distant future we need your help to keep our journalists writing.
Please do what you can today to help us keep working for the coming months and beyond.