Yanis Varoufakis: Cloudalists: Our New Cloud-Based Ruling Class

Yves here. Since many if not most readers here tend to be techo-skeptics (“Why is the new thing enough better than the old thing to justify tossing an item that works and paying up for a premature replacement?”), doubts about algos, snooping devices, and voice controls for low-difficulty activities like turning on a light go with the terrain. Yanis Varoufakis describes how consumers participating in intensive surveillance allows for them to be manipulated with far more success than traditional marketers could achieve, allowing for tremendous profit opportunities for our new overlords, which Varoufakis calls cloudalists.

By Yanis Varoufakis, former Minister of Finance of Greece and co-founder of DieM25. Originally published at his website

Once upon a time, capital goods were just the manufactured means of production. Robinson Crusoe’s salvaged fishing gear, a farmer’s plough, and a smith’s furnace were goods that helped produce a larger catch, more food, and shiny steel tools. Then, capitalism came along and vested owners of capital with two new powers: The power to compel those without capital to work for a wage, and agenda-setting power in policymaking institutions. Today, however, a new form of capital is emerging and is forging a new ruling class, perhaps even a new mode of production.

At the beginning of this change was free-to-air commercial television. The programming itself could not be commodified, so it was used to attract viewers’ attention before selling it to advertisers. Programs’ sponsors used their access to people’s attention to do something audacious: harness emotions (which had escaped commodification) to the task of deepening… commodification.

The essence of the advertiser’s job was captured in a line spoken by Don Draper, the fictional protagonist in the television serial Mad Men, set in the advertising industry of the 1960s. Coaching his protégé, Peggy, on how to think about the Hershey chocolate bar their firm was peddling, Draper caught the spirit of the times:

You don’t buy a Hershey bar for a couple of ounces of chocolate. You buy it to recapture the feeling of being loved that you knew when your dad bought you one for mowing the lawn.

The mass commercialization of nostalgia to which Draper alludes marked a turning point for capitalism. Draper put his finger on a fundamental mutation in its DNA. Efficiently manufacturing things that people wanted was no longer enough. People’s desires were themselves a product requiring skillful manufacture.

No sooner was the fledgling internet taken over by conglomerates determined to commodify it than the principles of advertising morphed into algorithmic systems permitting person-specific targeting, something television could not support. At first, algorithms (such as those used by Google, Amazon, and Netflix) identified clusters of users with similar search patterns and preferences, grouping them together to complete their searches, suggest books, or recommend films. The breakthrough came when the algorithms ceased to be passive.

Once algorithms could evaluate their own performance in real time, they began to behave like agents, monitoring and reacting to the outcomes of their own actions. They were affected by the way they affected people. Before we knew it, the task of instilling desires in our soul was taken from Don and Peggy and given to Alexa and Siri. Those who question how real the threat of artificial intelligence (AI) is to white collar jobs should ask themselves: What exactly does Alexa do?

Ostensibly, Alexa is a home-based mechanical servant that we can command to switch off the lights, order milk, remind us to call our mothers, and so on. Of course, Alexa is just the front end of a gigantic AI cloud-based network that millions of users train several billion times every minute. As we chat on the phone, or move and do things about the house, it learns our preferences and habits. As it gets to know us, it develops an uncanny ability to surprise us with good recommendations and ideas that intrigue us. Before we realize it, the system has acquired substantial powers to guide our choices – effectively to command us.

With cloud-based Alexa-like devices or apps in the role once occupied by Don Draper, we find ourselves in the most dialectical of infinite regresses: We train the algorithm to train us to serve the interests of its owners. The more we do this, the faster the algorithm learns how to help us train it to command us. As a result, the owners of this algorithmic cloud-based command capital deserve a term to distinguish them from traditional capitalists.

These “cloudalists” are very different from the owners of a traditional advertising firm whose ads could also convince us to buy what we neither needed nor wanted. However glamorous or inspired their employees may have been, advertising firms like the fictional Sterling Cooper in Mad Men sold services to the corporations trying to sell us stuff. In contrast, the cloudalists have two new powers that set them apart from the traditional service sector.

First, cloudalists can extract huge rents from manufacturers whose stuff they persuade us to buy, because the same command capital that makes us want that stuff is the foundation of platforms (Amazon.com, for example) where those purchases take place. It is as if Sterling Cooper were to take over the markets where the wares it advertises are sold. The cloudalists are turning conventional capitalists into a new vassal class that must pay tribute to them for the chance to sell to us.

Second, the same algorithms that guide our purchases also have the capacity surreptitiously to command us directly to produce new command capital for the cloudalists. We do this every time we post photos on Instagram, write tweets, offer reviews on Amazon books, or simply move around town so that our phones contribute congestion data to Google Maps.

Little wonder, then, that a new ruling class is rising, comprising the owners of a new form of cloud-based capital that commands us to reproduce it within its own algorithmic realm of purpose-built digital platforms and outside of conventional product or labor markets. Capital is everywhere, yet capitalism is on the wane. In an era when the owners of command capital have gained exorbitant power over everyone, including traditional capitalists, this is no contradiction.

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  1. DJG, Reality Czar

    I’m not sure that I agree with Varoufakis that he is describing a new phenomenon. I also wonder if we are talking about a new form of capital.

    For some time, I have been wondering how it is that in U.S. culture, new distribution systems are considered new “industries.” Of course, Varoufakis points out that the cloudalists alter and distribute–so I am in agreement here with him.

    But the phenomenon goes back, I’d venture, to the Sears Roebuck catalogue, which undermined local stores and which involved sending products from warehouses in Chicago (among other places), products with standard pricing and guarantees. According to Wikipedia: “Before the Sears catalog, farmers near small rural towns usually purchased supplies, often at high prices and on credit, from local general stores with narrow selections of goods. Prices were negotiated and relied on the storekeeper’s estimate of a customer’s creditworthiness. Sears built an opposite business model by offering in their catalogs a larger selection of products at published prices.”

    The first Sears catalogue went out in 1887.

    Likewise, United Parcel Service is distribution, not an industry: In fact, it was the first slice off the business of the Post Office. Consider it an early attempt at privatization. Founded 1907.

    Throw in Federal Express, which is UPS airborne. Then Amazon, once it became obvious that the WWW was good at linking people and goods (including pornography, but also including, ohhh, dictionaries of Occitan and small candymakers). Consider Etsy.

    These are all distribution channels–not industries. And not all that new.

    So are cloudalists an innovation? Or are they just exploiting the WWW the way that Sears was able to ship, originally, using the railroads, particularly from Chicago?

    Offering credit and distribution, but not a new industry.

    Now: Spying on one’s customers. That is a separate question, in my mind.

    1. Susan the other

      Instant feedback is interesting. My guess is that there is no real receptor for negative feedback for something as accommodating as Alexa. She will navigate all the positive possibilities and if none are there go into some default mode that is incapable of learning – so that there is just an endless loop of undesirable options. Disguised as a faithful servant. So Varoufakis’ “Once algorithms could evaluate their own performance in real time… they began reacting to the outcomes of their own actions” is actually kinda tragic.

  2. Christian Reilly

    I’d say Yanis is describing Surveillance Capitalism (users’ data being understood as behavioural surplus, which is then monetised by surveillance capitalists). I think this is a better term for the phenomena than cloudalism/cloudists. My intro to this concept was Shoshana Zuboff’s 2018 (?) book “The Age Of Surveillance Capitalism”, in case anyone’s interested in this. I think it (the phenomena, not necessarily the book) needs much more scrutiny than it seems to be getting.

  3. kriptid

    At first, algorithms (such as those used by Google, Amazon, and Netflix) identified clusters of users with similar search patterns and preferences, grouping them together to complete their searches, suggest books, or recommend films. The breakthrough came when the algorithms ceased to be passive.

    When I opine with colleagues on the matters discussed in this article by Mr. Varoufakis, for whom I have tremendous respect, it seems that this point he touches is what many fail to understand.

    They seem to still live in the former world described by Mr. Varoufakis, imagining that products and services are recommended to them by some white-gloved, benevolent digital butler doing its utmost to serve their needs.

    However, at some point, we’ve transitioned to a new model in which advertising is not an effort to sell a product to us, but to craft us into a product ourselves, with consumptive patterns that can be predicted and manipulated.

    I’ve (dis)affectionately termed this unholy enterprise as “the quest to turn everyone into a spreadsheet.”

    1. Acacia

      Reminds me of…

      “Galbraith has argued we no longer have free markets; corporations work out what they have to sell and then prepare the market so that we will want those products”
      Psychopharmacology & the Government of the Self

      1. JEHR

        Yes, indeed. That strikes me as being the gist of the whole capitalist thing. Fitbit on one’s wrist does not make a walk or a jog any better but the seller wants us to think that a walk or jog without it will not be as fulfilling. That idea really does not hold much logic if one realizes that one walks for real benefits other than the number of steps, or our heart rate, etc., real benefits being breathing fresh air, using our muscles, looking at the scenery, hearing the birds and all the other physical benefits of walking. Human beings are so easily deluded into consumers’ trappings..

        1. ChrisPacific

          You can opt out of individual targeting for most of these services and there are even services that will do it in bulk for you. (Not that this invalidates the point in the article – we shouldn’t have to – but it’s worth mentioning). You may have limited ability to stop them tracking you, but you can prevent them from monetizing the result, at least in your individual case.

          A side effect of doing this is that you retain a level of immunity to Fitbit style fads and hysteria, and keep a better grasp of context. It was some time before I even heard of Fitbit and when I did I was perplexed at why people were willing to pay so much money for a heart rate monitor.

  4. lyman alpha blob

    Great article and I like the term ‘cloudalists’. It has a very Olympian feel to it, and if you read your mythology you know the Olypians don’t last forever!

    I’d quibble with one point –

    …the principles of advertising morphed into algorithmic systems permitting person-specific targeting, something television could not support.

    I’d argue that television does support targeted ads. There are different ads aired during football games than during daytime dramas to target the specific audience of each. That’s why daytime dramas came to be called ‘soap operas’ after all. The new algorithms may claim to target more specifically than that, but I’ve never seen actual proof that they do. But as long as enough C suite types believe that they can microtarget people, the tech companies will billions off of advertising by charging unjustified rates and use that to continue to play an oversized and largely detrimental role in our society.

    The product ad agencies are selling these days isn’t soap or athlete’s foot cream – it’s the belief in the efficacy of person-specific targeted ads.

  5. Mikel

    Alwaya remember: there is no actual cloud.
    Also important, algos are still binary.

    But think abou “cloud” and why that marketing term?

    In realiity, what is being talked about are servers in specific locations. A big part of the so called “revolutuonary cloud” is simply moving information from one storage loation to another.
    It.all has to go to specific locations because that is how it is collected. At these locations are human beings with names.

    The word “cloud” was chosen, I think, to mystify.
    I wouldn’t call them “cloudalist” – time to demystify.

    It’s similiar to the hype about crypto being “decentralized”.

    More care needs to be taken about how insidious marketing terms can become.

    1. Acacia

      I gather the metaphor of the cloud is that while, yes, there are specific servers, the companies that run applications on them don’t really care deeply about the specifics. They rent the servers from another company (e.g., AWS) and the actual servers could be in any number of different data centers, and the server you are connected to for any given session could be in any number of different racks within that one data center. There could be hundreds of identical servers all running the same app. Which specific server are you on… that depends on a load balancing algorithm. Voilà, the cloud.

      1. Mikel

        They all have locations just as the people asking for the information and paying for it have locations and names.

      2. cfraenkel

        It goes further than that…. you’re not on a ‘specific server’ anymore. Every update on your screen is generated from many inputs, from many servers, all doing tiny bits of the whole. It gets difficult to describe in plain English : ) You can build web applications without using any individual servers, by hosting your code and data on services provided by the cloud vendors.

        The main value to the cloud is by not being tied to specific pieces of machinery, the care and feeding of that machinery is no longer your problem, someone else is taking care of it. This is a big cost and time sink that you can now spend doing something more relevant to your customers.

        (the term ‘cloud’ is perhaps the least mystifying jargon used in this space : )

        1. Mikel

          It still has to be somewhere and be accessible to a person in a place. I keep person in the conversation because it is all being done for the benefit of a person or persons.
          The cloud vendors are in a place.
          Applications are built from a place.

          The overarching point I’m getting to is not to let the tech be a shield from accountability : )

        2. Mikel

          And I bet there is a location from which ownership of any data has to be claimed – for legal reasons.

      3. digi_owl

        It is pretty much a recreation of the time-sharing that cropped up late in mainframe’s peak.

        And my major worry is that it is leaving us with a generation of “programmers” that are completely ignorant of anything going on below the database (or their equivalent).

    2. ArvidMartensen

      Indeed, language has been commercialised and weaponised. The only way out is to refuse to use the terms in the ways that have been invented or rebadged to suit a controllist agenda.
      So, one example relates to the words “who”, “whose”, “whom” have been rebadged. 50 years ago they were exclusively reserved for human beings. You knew that a “who” was a person, a “that” was a non-human. Varoufakis falls into this trap eg “a traditional advertising firm whose ads…”
      Another example is the word “elites”. This is the word that those in power have taken to refer to themselves. But elite used to mean someone superior in quality, rank, skill, etc.(Merriam-Webster), eg an elite athlete, one at the top of the competition,an elite chess player etc. There is ample evidence that those who are the visible faces of power are not superior in any way that decent people would like to copy.

      If we use these words as redefined, then it means that we really believe that corporations are just people like us and deserve the rights and protections that people deserve. Do corporations deserve these rights and protections? Have they been given human rights but few responsibilities towards actual humans, and for what end? Does humanising corporations hide and protect the actual human perpetrators in corporations from prosecution for things such as murder and fraud?
      And elites. Does calling those who rule over us “elites” train us to accept that they are somehow superior to ourselves. This is dangerous. It takes away our confidence to evaluate and criticise the motives and actions of those who are setting the agenda, whoever that is. And software acting as their invisible agent will also be reified as elite as time goes on, further degrading our human right to decide how we want society to function.
      I can foresee a time soon when if you challenge an algorithmic decision, you will be told that the algorithm is way smarter than any human being, and by not recognising their superiority you are just proving how stupid you are.
      I suggest that we start using more realistic language to protect ourselves. Not “elites”, but looters, for example. Not “democracy” but oligarchy, or “US democracy”. Not elections but voter theatre. Not billionairares but oligarchs. Not international organisations, but US-controlled organisations.

    3. deplorado

      I agree with you. Cloudalists does mystify – for those that don’t know from cloud – and for the rest, it belies a cheap attempt at ephemeral originality. No need for that if you have a serious point to make.

      “cloud-based capital” – huh? Capital is based in law.

      I believe many will disagree, but I admit that I don’t view Varoufakis as serious. Would love to provide proof but I don’t have the time.

    4. anon y'mouse

      the only cloud is the one Big Brother will be sitting on, from which vantage he can notice and eventually regulate all that we end up doing.

    5. drumlin woodchuckles

      Perhaps we could call the general category of “servers” where the information goes to be the “server plantation” and the people who guide us onto their server plantation are the serverists.

  6. super extra

    Varoufakis misses the most important reason why Alexa is even a ‘thing’: the entire AWS cloud infrastructure is built out with loss leader products to secure a market vertical from any competitors (same model that they used with the retail side at Amazon, but AWS is much much bigger). They have the massive infrastructure to build out products that do not yet have buyers, and they have the financial runway to keep those products in place until they break even or are the leader. If AWS wasn’t such a dominant leader in their ownership of the cloud infrastructure, they could not have flooded the market with their cheap surveillance devices (which they give away basically for free to the users), nor could they backstop the service itself with all the at-cost infra it is running on.

    ‘Cloudalists’ is a cute term but this is just normal monopoly stuff. The Cloud doesn’t manipulate minds to buy whatever the wizards dictate. The Cloud itself is just a recreation of the mainframe with a lot of marketing and user-friendly layers packed on. Using loss leaders to secure a market in any industry should be disallowed. It creates massive waste and closes off innovation.

  7. digi_owl

    Makes one wonder if these “butlers” are the last stage before we enter the realm of a truly automated paperclip maximizer.

    Next up, opting to be put into a nutrient bath and patched into the metaverse on a permanent basis.

  8. responseTwo

    When my wife setup Alexia in our kitchen, as far as I was concerned, the CIA could hear everything we did/said. One time it offered to learn someone’s voice. I’m planning to start talking out loud, to myself, about taking Xylophone lessons. I wonder how long it will be before I start seeing/hearing Alexia begin info share on taking Xylophone lessons.

    1. playon

      Some websites where I go to pay bills online are now offering voice recognition as a biometric identification. The come-on is “increased security”, but no thank you. I keep my laptop mic off at all times except when using Zoom meetings. The ever-increasing collection of bio-data is creepy.

      Many sites now want your phone number as well, and in the case of twitter I was forced to give it to them when they locked out my account over some trifling comment. Of course, I don’t really need twitter, but…

  9. Mikel

    Data Brokers: Last Week Tonight with John Oliver (HBO)
    “Apr 10, 2022 John Oliver discusses how much data brokers know about us, what they’re doing with our personal information, and one….unusual way to change privacy laws.”

    Discussion of the cloud reminded me of this clip. But go to 19:45 toward the last 5 minutes for what Oliver has done.
    I want to know what’s in the manilla envelope. What kinds of info was he able to collect? He and his staff have used ad click tricks to gather information on a demographic (that fits a lot of Congressmen/Senators) around the area of the Capitol.

  10. orlbucfan

    I hate the computerized voice of Alexa/Siri. I put up with it cos I live in the States. I do not listen to either on any of my devices. It’s worse than musack. Anyone born with a decent brain in this country knows all about advertising. We’re soaked in it. And if they know how to read and think, oh brother, what a headache! I am not a vidiot, thank whatever, and I was born into a high-tech family. My hubster is a retired hi-tech genius. End of rant.

    1. Sue inSoCal

      Yeah. I use a private search engine that runs through the Netherlands paired with a whopping ad blocker with a firewall. It helps, let’s put it that way. I’ve disabled Siri as effectively as possible. Apple went nuts when I disabled Find My Phone. I discovered that thing was pinging my location off towers 24/7 unbeknownst to me. As Oliver points out, privacy should be the default setting. “We don’t sell your data.’” is such a joke. Ha. Smdh.

  11. WobblyTelomeres

    I regret all the clouds I drew in the 80s and 90s when attempting to explain the difference between routers and edge devices to the marketeers.

  12. Carolinian

    Uh, I buy chocolate because I like chocolate.Without a doubt advertisers studied at B.F.Skinner’s knee in order to pinpoint all the hot button “positve reinforcers” that motivate us.

    But I never thought Mad Men to be terribly realistic. It was more of a business soap opera with some appealing cast members

    1. playon

      Yeah it was a soap opera in many ways but I thought the show did a fairly good job of portraying the zeitgeist of Madison Avenue in the 60s.

  13. dadaclonefly

    The work of theorist McKenzie Wark might be of interest here. She has called this new class “vectoralists” and suggested that we might be moving beyond capitalism to something potentially worse.

  14. Amfortas the hippie

    i literally don’t know anyone in real life who knows what a rentier…or rent-seeking…is.
    even when i explain it…it’s glazed eyes or other indicators of not having attained.
    and even when i explain it in terms of tapeworms and such…
    this is a remarkable achievement, methinks.
    to so engineer humanity so that they can’t even see the violent parasitical elites who are at the root of so many of the intractable problems.
    indeed,i glean that most people i know would rather wear the logos* of the corps(e) those parasites own, than understand how fubar they make everything.

    *saw a guy in san antone just the other day wearing a crisp new tshirt with bezos’ penis proudly sprawled across his chest.

    1. drumlin woodchuckles

      Maybe we need a more layman-friendly word for it . . . . like tollbooth-racketeer, for example. Or tollgater or something.

  15. John Gathly

    Yanis Varoufakis is often trying to push this idea that what we have is not capitalism, because of various features of the online world, and he makes some interesting points. For example, he’s pointed out that when you create value for Facebook by using it, you’re not a worker and you’re not a capitalist. You’re more like a serf who creates value by using what the owner owns, but without wages. You’re paid in likes and cat gifs which the social media platform can generate infinitely.

    These kinds of points are interesting, and worth exploring as aspects of our current form of capitalism, but I don’t think it has in any fundamental way changed the nature of the global capitalist system. Slave production systems also exist under capitalism, but the overall nature of capitalism is still the same and it’s still global. It still has labor producing surplus value alienated from the laborer to create capital all through the system, even if some social media companies have inserted themselves in the market’s distribution mechanisms. Capitalism, after all, is a system of production.

  16. Godfree Roberts

    The Chinese are pioneers here. Their legislation is already taking effect, leveling the current power imbalance between the masses and the algos.

    P.S. Guangdong’s IP court hears more cases each year than all US IP courts combined. IP is finally a thing in China.

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