Public perception of the market is now shaped through the serious game of the stock screener. Gamification of the market is a key aspect in the transformation from a human to a technological market.Securitization or: Seeing Wall Street as a Server
Candy Crush is one of the most successful social network integrated games to date.1 The game dynamic has the player to match similar icons which then vanish, allowing more icons to descend into the game board. Simply put the player combines matching shapes or colors into groups. Candy Crush uses narrative and immersion as spackle between individual level elements. When users complete acts of the game they are treated to cut-scenes, short animated interludes, which advance the story. To access the next plateau of the story world, the player needs to recruit three friends to vouch for them, wait a number of hours, or buy passage. Without support from other players, progress is slow or expensive as one would buy virtual goods to progress to the next level. Candy Crush avoids the problem of spam, as the messages directed toward other users are genuinely those created by other players. This is not to say that Candy Crush–related Facebook messages are not irritating, but that they are generated when a real person wants them sent. There is a real person there, asking for your help. Or at least that is the story that sells the game to the stock market. The social feature of Candy Crush does not facilitate interaction as much as it is a personalized advertisement for the game. Much like Tetris, Bejeweled, or any number of other fine small spatial games, Candy Crush is playable entirely alone.
King, the developer behind Candy Crush, was no newcomer to the online game space. Before Candy Crush, King had developed a number of titles.2 The monetization scheme is relatively clear: direct payments from players for immaterial goods, which can be lucrative if an audience willing to buy can be found. The key to real value on the market is not the product, but the possibility of a template. A single restaurant can be a business: a viable franchise concept is an empire. Pet Rescue Saga (a format clone of Candy Crush) would never be a mega-hit, but if King had a format that could be replicated, mountains of cash could be on the horizon if spin-offs made even marginal profits. King was a single-product company, and the Candy Crush formula was their claim to value. By keeping costs low, King could build a great product and a decent business, worth billions.
Skepticism of the King IPO was quick to come. The New York Times’ DealBook noted that the Zynga IPO cast a “pallor” over the entire social games market.3 Zynga, the maker of such social network–enabled hits Farmville and MafiaWars, hit the market only to fall flat. By the time they began selling shares, their core products were stale. Zynga clearly did not have the secret formula for great games. How could King? Financial journalist James Surowiecki made a compelling case against King in The New Yorker.4 His argument was a pincer move where: the game market is highly unpredictable and development costs are very low. Together these produce a market flush with supply and difficult-to-model demand. Discussed in Chapter 1, the nobody knows principle clearly applies to games. Even a well-developed product doesn’t necessarily sell and some of the most artistically interesting products never reach more than a small audience. Worse, unlike traditional media where some access and distribution barriers remain, the social game market may be more democratized, meaning that many firms would be constantly challenging and supplanting King in their own market. The case was so well made, that popular financial news site Business Insider covered the story as a “brutal” takedown.5 Compared to legacy media firms that were protected by high entry barriers, the social game market is precarious. The idea of making a major investment in a single game seems like the premise for a joke on late night television, not the New York Stock Exchange.
The IPO did not go well. Nicola Leske, writing for Reuters, noted that underwriters for the IPO called in favors to prop up the sale.6 The price of King stock fell after the opening bell. The fact that 78 percent of King’s revenue came from Candy Crush did not help. King fell hard, but not as hard as Zynga. The notable difference is the overhead of the companies; King was a small, lean operation. Despite Candy Crush shrinking, there was still profit to be made. Future returns for Candy Crush depend on the durability of their play structure and their ability to retain their engaged whales. Cool sugar is fragile and beautiful, but it tends to break.
King could have stayed private and milked the revenue flow from Candy Crush for years. There was no need to go public. Without the stock market, there would not be the chance to compress the possible value of the company. Returns from managing the company would have accrued, with a slow decline or possibly another hit. Issuing stock is something like a time machine: stocks sold today based on a future valuation make those returns real in the present. Compression shifts scale as well. A trickle today that one imagines as a future river can induce a deluge.
The long story of King became short in November 2015 when Activision-Blizzard purchased King. Although the share price at purchase was well below the IPO price, King was worth nearly six billion dollars to Blizzard. Why was King so appealing? Scale.
Candy Crush had millions of active users, although those users had never been easily steered to other products in the past, the prospect that they might find a new product was enough to make them valuable. From a jurisdictional standpoint, King’s Irish home base allowed Activision to purchase the company without paying taxes in the United States.7 When combined, the social user base of the games owned by the conglomerate is larger than Twitter, making Activision-Blizzard-King one of the largest social networks in its own right, even if much of the business is a synergistic app running parallel to Facebook. This is the same story of the King IPO, replayed in the mergers market: the potential to monetize on a large scale overwhelms fundamental considerations. Synergy sells.
Taking stock
In this chapter, the topic shifts from monetization to securitization. The performance of value shifts from the relationship between the user and the interface, to the perception of groups of users to the technology of the stock market. It is this issue of scale where a second discourse of market valuation connects the discourse of monetization on a small scale with the large-scale discourse of the IPO. The process where micro and macro are linked does more than simple combination—the act of combining those assets into companies and then to format elements of those companies as securities requires the construction of credibility, capacity, and responsibility. The stock exchange is both a pool of meaning to be dipped into and an organizational technology.
Stock markets are alienating; their operations are seen as mysterious at best, and all too often nefarious. Although a number of different stock markets exist (Facebook is on the NASDAQ), the most important market for understanding the discourse of capital markets is the New York Stock Exchange. Currently owned by Intercontinental Exchange in Atlanta the figure of the NYSE is the synecdoche for all capital markets, even if the trading floor is something of a relic.8 This is an important point as the NYSE is still presented as the center of capitalism, but now serves a role as the stage, rather than the market. NASDAQ is owned by NASDAQ OMX Group. NASDAQ is smaller and different in structure, operating without any physical trading floor, often with less prestigious stocks.9 Technology companies preferred the NASDAQ in the 1980s.
This chapter will provide:
• A short history of stock markets that emphasizes the ways that the market has positioned itself for public legitimation. “Securitization” is a relatively young word, the Oxford English Dictionary tracks the term only to 1982.10 Securitization first appeared to describe the collection of home mortgages; it now describes the collection of many assets, and the potential of social revenue streams. The stories told and artistic renderings of the market historically hinged on affinity among traders rather than the technical capacity of the market system. Writing the history of the market in this way opens up new possibilities for understanding how publics become involved in the fantasy life of money.
The chapter engages three key terms related to securitization:
Gamification, scalability, and valuation
Public perception of the market is now shaped through the serious game of the stock screener. Gamification of the market is a key aspect in the transformation from a human to a technological market.
Scalability provides a conceptual framework for dealing with differing extends of communication systems as well as the physical infrastructure of social networks. This section on scalability and scale deals with the term in multiple dimensions for social networks, communication, and political theory.
Valuation is presented as both a technical assessment of a company and a sales pitch. This review of the concept and use in everyday life frames valuation as an art rather than a science.
• The theories of screening, scaling, and valuing are deployed to understand the affective dimension of IPO pricing and purchasing.
• Finally, the chapter considers the case study of the public relations campaign deployed by the NYSE during the Great Recession to maintain confidence in the idea of the stock market. This is an important point as it crystalizes many of the key concepts used to value social media.
Amsterdam, 1602: the stock market is born.11 Early Dutch trading was sophisticated, including various derivatives and other options that tended to extend along affinity networks, such as families.12 Early efforts in equity participation were premised on the lucrative returns of trade missions to East Asia.13 Before the establishment of the permanent company, spice concerns were short-lived, often paying dividends in spices before dissolving.14 Instead of ending, the Dutch East India Company carefully maneuvered to avoid payments and survive to trade another day.15 A new technology for organizing business was born. Disposable was replaced with reusable. Dutch spice traders eclipsed their European counterparts.
Early New York trading took place near Peter Stuyvesant’s barricade.16 After many years around this literal wall, the traders were more formally organized. The New York Stock Exchange began operation under the auspices of the Buttonwood Agreement.17 Traders did not meet at 68 Wall Street spontaneously, but as the reaction to the Panic of 1792.18 The panic stemmed from William Duer’s speculative attempt to corner the market on government debt, which formed feedback loops throughout the economy as rampant fluctuations in the price of the bank also caused contractions of credit that then destabilized the bank.19 Purchasing stock in the Bank of New York required payment in government debt; if one could control the government debt needed to purchase stock, they would have one of the most valuable assets in the entire economy. Cornering schemes are vulnerable as they require a great deal of money to execute and can be countered by another party recognizing the opportunity to capitalize on the attempt. Stabilizing the economy was not uncontroversial; the collapse of the bank was for some, like Thomas Jefferson, an argument against the Federalists and their large-scale institutions.20 Hamilton’s approach to buttressing the economy (extending credit and facilitating communication) became the template for future economic stabilization efforts. The Panic of 1792 is the original American political-economic melodrama: good, virtuous farmers versus bad, profligate city dwellers.
The stock exchange of the eighteenth and nineteenth centuries was not like the exchange we know today. Outdoor trading was not prohibited until 1836.21 Complete statements were added in 1853.22 Watering, secretly issuing additional shares of stock to friends, was not prohibited in practice until 1869.23 Specialists for continuous trading were not present until 1871; before that individual issues were read and traded twice per day.24 These are just a few examples. There was not a smooth transition from the Buttonwood era to the present. Entire careers would pass between substantial changes in practice. The nineteenth century was not a time of economic stability.
The historiography of the New York Stock exchange is a fascinating topic as few histories were written before Donald Sobel’s landmark, The Big Board.25 Sobel told the story of a stock market that in, just over a decade after the Depression, had become fundamentally entwined with the lives of many people. This is shocking given the deprivation that the market had wrought. The people of the market are less of a feature of the story than the companies traded and the structure of the market. Charles Geisst took a slightly different view in his later history of the stock market, emphasizing the people more than the particular issues to be traded. Writing the history of the stock market is difficult because it is not a matter of writing the cultural history of a technology like the stock ticker, or even of the people trading stock: these are interesting topics for writing the history of the market, but they are not the market itself. To write the stock exchange is to consider a fleeting image and aesthetic—a sensibility, a time, and a promise. Sobel’s history is powerful today because it avoids the risk of being sutured to some other, less energetic mode of historical consideration. If you lose the dialectical play of the legitimation of the market and the facts of operation for a mere consideration of the traders at work, you lose the story of the stock market in the American imaginary.
In 1992, the exchange commissioned a bicentennial coffee table book. Entitled The New York Stock Exchange: The First Two Hundred Years, this large-format picture book uses a series of paintings, photographs, and timelines of important events to tell the story of the market.26 The book features two kinds of images: significant people and pictures of the exchange itself. Even when representing average investors, the focus is on the affinity of the people and their position in space, not market capitalization. The building is interesting for other reasons. Ezra Winter was commissioned in 1930 to paint a mural depicting the signing of the Buttonwood agreement.27 At the time of painting, the onset of the Depression, the mural was one of several depicting the history of the stock exchange. The image is framed as something of a snapshot, with a table in the foreground with formative documents being signed, with a man blocking our view of the table with his back. In the distance in a plane of focus beyond the scene of the signing we can see traders actively talking, and the rigging of a ship in the distance through the city. The idea of a friendly agreement, coffee house culture, and general affinity as a market foundation are key conceptual recourse in the worst of times. This is not a market of aliens, but of people, doing their best in difficult circumstances to facilitate trades.
What appears constant from the eighteenth century on is a preoccupation with the figure of the trader—early in the book a two-panel charcoal drawing depicts a trader on good and bad days.28 In an upper panel we see a good day, a jovial fellow, clean-shaven, primping his velvet lapel. In the lower panel, the figure of the trader with stocks down, ungroomed with a wild beard, crumpling a newspaper in his hand. The history of the market is understood partially with timelines of important events, but often more through the use of caricatures. A particular favorite is an illustration of the “jollification,” a party to close the nineteenth century, which featured boxers dressed as a bull and a bear, hired to recreate an iconic representation of the bull goring the bear—that night the bear lasted a full four rounds.29 The stock market was a friendly club, an affinity network.
The architectural details of the buildings of Wall Street have been a matter for public curiosity since for many years; the NYSE’s own history notes, “The public was attracted not only by the size and classic design of the structure, but also by its futuristic engineering features. Newspaper reported stories of these innovations—from the giant annunciator boards requiring 247 miles of wiring to the pioneering use of air conditioning.”30 For the time period, the building was a technical marvel. Until the mid-twentieth century photographing the interior of the trading space was prohibited during operating hours. A full page of the history is devoted to an early photograph taken with a smuggled camera that seemingly configures the aesthetics protocols for future images; the room itself is stable but any person in motion is made something of a blur—the stage is timeless, the actors temporary.31 At its height, this center for trading had many rooms in multiple buildings where securities were exchanged, luncheon club, hair salon, and gallery where tourists and other interested parties might watch the ongoing activity of the floor where prices were negotiated and the economy moved forward.
After the September 11 attacks, all access to the trading facility ended.32 By 2009, two years into the Great Recession, there was one trading room left in operation, the luncheon club has closed, and visitors were no longer allowed in the gallery, even with the introduction of bulletproof glass.33 The market has moved from an open community where anyone could choose to be in proximity, to a closed technical process. Perhaps most telling is an exchange between then CEO of the NYSE, Duncan Niederauer, and Steve Forbes. Forbes gestured toward the argument that it would be more efficient to simply close down trading on Wall Street. Niederauer responded, “But then we have that ability to intervene human judgment, real-time, if we have to.”34 The value of the built environment in New York is that is provides a tangible site where human judgment can directly interface with a machine world, with machine logic. At the same time, there is no reason why the floor or even co-location New York is necessary for intervention. This could just as easily be done from Atlanta or Minneapolis. After all, the NYSE is owned by Intercontinental Exchange of Atlanta.
The unique demands of the ethos of the market weigh on Niederauer’s comments; he would not want to be the director of the NYSE who evacuated Wall Street. Even if the built environment has become fetishistic, that it exists only to prove the exception to the normalcy of the technological market logic, the image of Wall Street underwrites the sale of stock and the evaluation of the future. The rituals of this place go on. The bell is rung. Wall Street is an ideographic reference. The image of this place is pivotal to the global economic imaginary. This referent is still so powerful that Jeremy Olshan, editor of CBS MarketWatch, announced in October 2014 that the network would abandon the use of images of the floor. “Still, by relying on trading-floor photos, we have been distorting the truth rather than reporting it. We are doing a disservice to you, our readers, and therefore we too must change with the times and find new ways to illustrate the ups and downs of the market.”35 Even in an electronic trading world, the imaginary of the floor persists.
The screener aesthetic
Seats dominated the stock exchange for centuries. Access was restricted on the basis of who might physically join the market. Electronics have collapsed the spaces necessary for market operation to the molecular scale. Direct trading is a high-volume, low-margin game. The extension of network technologies across the United States and affordable microcomputers enabled a broader transformation of the interface point for the imaginary space of the market.
Unlike the boiler room operations shown in such a stark light in The Wolf of Wall Street, the online discount brokerage changes the relationship between the retail investor and the market.36 Gone are the shady stockbrokers, acting in their own interest. Brokerage houses are now positioned as logistical assistants. The interface allows the customer to place their order directly and see it executed rapidly. Instead of a strip of prices slowly printing, the customer is presented with a montage of prices and charts. Inexorable and immutable the strip makes the trading world. Access to information is democratized and accelerated with preloaded charts and graphs, and Securities and Exchange Commission filings a click away. The interface presents a deep well of resources that serve as a form of backing in their own right. When combined with the power of cynical reason, the investing subject takes on the position of the insider: the trader who is supposed to know.37 The logic of the market world depends on the turn toward the individual as the sacrosanct hub for agency. One person at the end of a chain of relationships is far less important than the single heroic rich person describing the ways that they manipulate a computational system.38 The trading interface is a critical step in writing the story of the romantic individual stock trader. The website or app where an order is placed is the micro dimension of the market; the imaginary of the market in New York is the counterpoint.
Securitization in this aesthetic is tied not to the trappings of authority or the details of the lunchroom at the NYSE, but to the ways in which stock trading itself is reimaged computationally. Trading screens are organized according to best practices in usability research: design students are cautioned that “you are not the user” and that they should adopt design as a translational research paradigm.39 Kits for designing interfaces for phones and mobile webpages contribute to the standardization of the screen. Once standardized, users adapt to the screen. Iteration creeps along this feedback loop. Charts are manipulated through predictable controls that are remediated across web platforms. Learning to do stock trading requires only a cursory knowledge of the idea of a market and the identities of the firms being traded. Screens move from right to left; conventional sliders and tabs organize the information. Stylistically these forms feel mathematical. Screen designs are kept clear of unnecessary text, ads are internal, and functions are tightly mapped onto the display of trading information.
Online stock trading did not create the computational aesthetic, but it does profit from the deployment of computational reason in this aestheticized form. Aside from shifting concepts of scale, the underlying ideas related to planning and reason are long-standing. Interfaces bring a high modern sensibility to the trading of stocks; the chaotic world of market relationships across a noisy discourse network are replaced by the seeming order of the screen. Documents used to issue capital stock are riddled with warnings. Sales pieces for social network sites are graphical and persuasive. Once a stock appears on the screen it is legitimate; the prices provided in the montage are an accurate window of a real-time market—not the occasional report of an affinity network. Advertising for e-trade goads the potential customer—it is so simple that a baby can do it.40
Proceduralism is an idea from video game studies that can be very useful for understanding the rhetoric of interfaces.41 From a procedural perspective, designers are creating a series of cognitive tasks that users are meant to complete. These tasks then help users move toward a particular kind of feeling. The medium is the message, literally. Simulators are available to perfect trading strategies. Buying and selling become a complex game, only bolstering their appeal. Ian Bogost has argued that the best games are those without characters; complex system manipulators are the top of the genre.42 SimCity presented a complex system that could be manipulated, a game that asked users to consider the interaction of processes rather than their identification with particular characters as the starting point. Characters are enabling and limiting. Identification is known territory for communication researchers. The assumptions mapping a video game to a film or book are a little too easy. Books give the user a good deal of distance from the character just as they invite emotional integration. Films have less control and are more conventionally time-based media, but they are bracketed into shorter timespans. Video games unfold over long periods of play, the involvement of the interactive player making choices and making the reality is more powerful.
Unlike certain artistic and activist game experiences, serious games like Sim City evolve over time and offer opportunities for creative play. Will Wright, the designer of Sim City, focused on deploying experiences that were mapped onto really existing complex systems.43 The variables in the farm or the city can be controlled with multiple intervening factors. Distance from an abstract system when combined with user creativity can be engaging.
Stock trading is something of a game and a religion. Underlying the screener aesthetic is the idea that the underlying logic of the market can be understood; the price signal and the fundamentals mingle. What is tricky and compelling about the game of stocks is that so many of the other factors are stochastic—input response patterns change from moment to moment: the market is populated by people and robots with unexpected results. When played well, the game requires that the player be engrossed in a transmedia experience of market watching, interface manipulation, and research. In other games this is called the “meta” or the relationship between the different units of the game. Balancing the meta is an important task for any game designer. If we evaluate the construction of the stock interface as a procedural rhetoric, the collection of tasks and simulation tools are designed to help individual users appreciate the aesthetics of thinking at scale. Tactical everyday life is subsumed into the screeners of strategic rationality. Publics use the game interface to participate in the ideology of the market. The emotional payoff of the game is to see your line move higher, to take joy in money, joy itself. Once again the curious psychic life of money is apparent; this abstraction is a nexus of desire, personality, and possibility. Unlike the interface of Sim City, there is no need for iconic representation here: the world of stock is symbolic. Learning how to appreciate the beauty of the stock ticker itself is a critical part of the aesthetic of securitization. This sort of serious play does not diminish the position of the market in psychic life—it enhances it. The market is the absent cause of the behaviors that guide the world, aestheticizing that market makes the game fun, and the idea of the market even stronger.
Toward a theory of scale
Considerations of the size of communication systems are essential for media theory. Size is baked into many disciplinary formations in communication in the term “mass.” How do people transact when their partners are from far away? How do I trade with a perfect stranger? Who are the people and what do they want? Techniques for managing scale are central in the formation of institutions. Acceleration and expansion can produce dizzying possibilities, and even greater failures.44 Democracy requires a count; that count is always wrong as it requires the creation of categories that organize what is being counted.45 Market segmentation is a politics of scale for business. Yet these segments are never truly accurate. The polis is distinct from the mass state, the transaction is distinct from the security, and the pointer is distinct from the platform. The question becomes how we might inform the kind of thinking that can deal with size. Scalability, the idea that a system could be adapted for many users, is the end point of the analysis, although considerations of scalability exceed technical capacity. Theories of emotional scale dovetail with technical scale.
Figure 2.1 Matrix of positions on value and scale.
Describing the value proposition in dialogic or tactical terms maintains the romantic façade; dissemination or strategic terms begin to appear to be much like television.
The polis can be seductive for communication research as it poses an alternative with more, deeper communication. Dialog is a panacea. There is a certain truth to the idea that smaller systems do have the potential to be faster and more personal. Yet all too often, faster and more personal are not desirable. There are people who are not interested in sharing with you. Requiring disclosures from others is not helpful if the terrain of those disclosures would itself be violent. Disclosing sensitive information such as seropositivity or infertility would not be made easier by some sort of compulsory discussion. Communication privacy management theory, discussed in the introduction of this book, recognizes that engagement in dialog is conditioned on complex contextual rules. One cannot simply assert that more dialog is always better. Symmetrical and reciprocal norms of disclosure in dialog can be dangerous when the stakes are high.
Dialog infused politics can also exist on a larger scale through para-social interaction, synecdochal participation, and the accretion of identity. Personality politics can fly too close to the sun, devolving into demagoguery. Breaking down the norms that conditioned the inclusion of some kinds of emotional communication into the public sphere can be at times productive. Expressions of pain can be moving; tears move in ways that legal motions never can. Yet, as the emotional becomes compulsory the public sphere might be saturated with secondhand emotion and endless contrived conversation. Simulated affect can degrade the power of emotion. Worse, emotional argument can fall back into a teleological loop. Including emotion might help some calls for justice so the norms that exclude those arguments are eroded. There are other emotions and other conceptions of justice. Without some regulating idea of the rational and critical argument some of the worst emotional claims will surface and win. Rising nationalism around the world provides powerful testimony to this point. John Durham Peters argued in favor of dissemination, going as far as to claim that one-way dissemination would be far more compatible with agency and the multiplicity of symbolic practices than forced dialog.46 Scale is not only required to reach a larger size, but is also a possibility. What is particularly striking is that the base of much of western culture is profoundly non-reciprocal.47 Hospitality, love, and justice are profound. Peters is not alone in arguing for distance—many approaches recognize that immediacy can be painful or counterproductive. It is not helpful to ignore the violence of compulsory reciprocity or to treat all mass communication as domination. Power, reversal, and generosity should be open questions in the consideration of the design of systems.
Large-scale systems without emotional entanglement characterize the high-modern tradition. Abstraction, as a conceptual technology, allows the creation of new kinds of knowledge and new opportunities for control. James C. Scott’s critique of high-modern planning hinges on the elision of everyday human agency in the move from the small-scale model to the large-scale project.48 States see the way they do because they need to deal in massive sizes. Diversity of experience is invisible. Plans can’t work—they don’t deal with the everyday reality of people and how they exist in real time and space. Le Corbusier, for example, couldn’t plan for real humanity.49 People go where they want. High-modernist plans can come from a state social planner, Harvard Business School, or a large media conglomerate. Working on large-scale projects is possible only with the adoption of a certain way of seeing the world. Social network management sees at scale; this is not a question of the individual and their experience of the interface, but about the entire network as a thing.
Friendster failed when they told their users how to feel: in telling them who their “real” friends were, they destroyed their own product.50 Twitter supposed that unmitigated hostility would be tolerable for access to their pseudo-agora. In the vision of Twitter executives, the benefits of using the platform were worth the unpleasantness of dealing with other Twitter users. Facebook inflicts a particular theory of emotional modulation on the public, bringing users the stories it believes will make them linger longer on the feed, good feelings might carry over. Through the writing of this book the Facebook mobile interface has changed; where there were once buttons for notifications, messaging, and the profile, there are now a haphazard Craigslist stylized market and live streaming tools. The core use of the app and the possibilities that come with it are replaced with a high-modern experimental ethos, the height of methodology. Facebook promotes this methodology to ad buyers through the use of their Power Editor that allows the ad buyer to repeatedly split their audience for the purposes of testing different text-response patterns.51 Every interface has a potential A/B test—as if the reactions of the possible audience themselves are already understood and all relevant variables are held equal. There is no open response, just the confirmation of the superior logic of the designer of the technology. A/B testing is dangerously seductive, that which is easily testable via the interface and ad buying becomes the horizon of effect, deliciously quantified, styled with science.
The counterpoint to this sort of large-scale research is hyper-tactical research on participatory culture. De Certeau’s research has found a home in media studies because of his emphasis on the tactical, the everyday space of agency that stands outside of the practice of modern planning and technical rationality.52 Media studies scholars who are not attempting to redeploy the technical rationality of the system turn toward the collection of examples from everyday life, the uses of social media, the habitus of the users. As an empirical critical lever this is quite successful in contouring possible worlds to be made. At the same time, these approaches are risky as they might fall into the other trap—that of the polis, the romantic small community. While individual users might be discerning, the structures those users create are more often not.
High-modernism posts a network solution to political problems as well as issues in design and emotion. If the ideas of high-modernist social network planners could simply be applied to politics, the government could be efficient as Facebook. Evengy Morozov found fault with the politics of solutionism (the idea that issues in politics are merely issues with the technology of opinion aggregation) as it failed to account for the actual nature of problems, instead applying stale proscriptions for increased transparency or additional preference discovery.53 Consider his critique of political transparency—it is not that government is opaque, but that the political style of transparency is politically destabilizing. Adding more information feeds a sadism game that thrives on exposing secrets. New techno-solutionist plans call for even more transparency, even if transparency is contributing to political deadlock. This is not the slow government of James Madison’s, but a government so fast that venom spreads across the network faster than anyone could have seriously proposed in the eighteenth century.54 Representative democracy depends on dysfunctional communication systems. Morozov returns to scale as an idea, recognizing that scale and functionality are often competing outcomes.55 High-modernist technology advocates oversimplify agency to make large projects seem reasonable.56 Flattening the idea of political, aesthetic, and moral difference is critical to the modernist project. Key to the technological style is the presumption that a lack of clarity is precluding agreement, which is also a key premise of the idea of a number of theories of markets and the ill-fated Google+. The dominant style to be implemented in these plans features increasing clarity and granularity of control. With adequate verification of sensory inputs enhanced granularity and control should allow the formation of a meaningful stock market. Highly granular, scalable interfaces are fun to play with—Sim City offers a kind of instruction in economic governance.
The King IPO is an important case for thinking about scale. Candy Crush is a core franchise with a declining user base. If privately held, the owners of King could have run the company and extracted value for years. Long-term, slow accumulation might reach a large scale, assuming consistency and good luck. By compressing time through the issue of capital stock, King could scale up the fortune that the company might make. Securitization deflects the challenge of expanding the company from the synchronic sense of the now toward the broader sense of the diachronic company across time. Flash forwards interrupt the present with the potential of the future. Monetization often comes to be a strategy of legibility. It is a way of making sense of everyday social activity for the purposes of strategic thinking. Chapter 1 detailed the ways in which these models work and don’t work—why the failures of high modernism are replicated again and again. Which is not to say that large institutions always fail; this book is a story of the success of high modernism in the form of Facebook.
Scalability historically referred to the creation of a stable index for a variable, only coming to refer to rapid expansion recently.57 Google NGram analysis suggests that the term had turned to refer to use by many users, with rapid growth after 1993.58 Today to be scalable means that a system could be expanded for use by more users, in more places, simultaneously. As an engineering challenge, scalability calls for understanding the underlying technical capacity of a system. It is not enough to accumulate wires, disks, flash chips, and air conditioners. Metal and silicon pieces must be deployed in meaningful configurations. Data structures are designed to take advantage of relatively simple ideas, like using the closest hard drive to a processor to complete a task. Hadoop and Map Reduce have been developed to manage the problem of placing data in the right physical places to maximize system speed. At the most fundamental level, the promise of the cloud, ubiquitous enhanced capacity cheats on developing scale internally. Designing a system for scale is difficult. Specialized engineers and equipment are expensive. Companies turn to Amazon Web Services, Microsoft Azure, or Google Cloud to do the heavy lifting.
Problems in scaling are persistent. Twitter’s API does not return results for queries of the database for more than a few days in the past, keeping the data far off for researchers. Some third-parties claim access to large banks of Twitter data; these products are subject to the API and the physical infrastructure of Twitter. The actual flow of the moment is gone. Facebook also faces challenges with storing large volumes of data. The vast majority of the data stored by a social network is not needed on any given day. In fact, much of what is stored may never be useful again. Data must be retained, but it is not always valuable. The idea of now, a point, also called Kairos, is foundational in a number of approaches to communication research.59 Social networks capitalize on clicks for stories that make sense only for a very short burst of time. The clickbait industry provides a deep well of examples. From a distant historical perspective, few will remember and sparsely anyone will care about what images were associated with the winter 2015 Starbucks’ Holliday Cup Facebook story.60 By the time you read this—that last sentence will be stale. This story is an example of a false start—a popular press story that induces a reaction to a trivial bait, with reporters lying in wait to cover the reaction. In the most dramatic examples, there may not even be an aggrieved group; the center of social media politics is often hollow. The race for clicks often requires that a hot-take become meta as quickly as possible. Just as meta-data (data about data) is critically important, so are news stories about news stories. False starts are particularly effective when they allow the engaged public to express righteous indignation. Social networks power down the systems storing the images and statuses from the distant past.61 After all, what good would these do when they cannot inform the logic of a computer system or advertising campaign now?
More data does not necessarily mean more insight. Fuzzy logic won’t produce an empirically meaningful set of market segments. Slow, careful, human reason provides concrete insights that can be missed in a fast computational culture. Without semantically aware, and dare I say creative software systems, the number of points created by the flow of time is beyond the capacity of thought. Every time one accesses a social network they are managing scale.
Scale dominates the conversation about industries. It is not a question of which companies have the best return or stability or business practices, but which are the largest. What does it feel like when the owner of Zara passes Bill Gates for a moment as the world’s richest person, if even for just a second? The film The Social Network was on point as the drama of titans in a court room is more piquant than a discussion of computer networking strategy.62 It is that later formation that really matters for scale. The story of Facebook is not about giants of industry or Aaron Sorkin’s vision of Mark Zuckerberg’s love life, but the expansion of Facebook along a series of nodes, expanding to neighbors of neighbors to get ahead of ConnectU and other platforms. That story of scale is decidedly unromantic, just as the story of the sale of shares in an IPO to partners of the underwriter is less enthralling than the idea of making big, bold trades on the market. Representing a slick Silicon Valley office becomes the analog of the painting of the trading house. It is not that Sorkin’s history of Facebook is wrong, but that it is right. Criticism of The Social Network often misses the point—the film perfectly captures the imaginary of scale in the world of the IPO and the NYSE.63 Details and technique are for little people. Sorkin distilled the romantic melodrama down to an elixir. The success of the business is in the past tense and even the passive voice, Facebook succeeded, now we can write the story of the industry in terms of the people who built it.
Politics of valuation
Much like the divergent approaches to business analysis posed in the introduction there are two similar approaches to valuation.64 Absolute pricing, and valuation, answers that a business is worth cash flow of the company. This is calculated using some version of the future possible dividends to be paid by the company, or given the propensity for new companies to not pay dividends, corporate earnings can provide key information. This answer is extremely concrete: the business is worth what the business is worth. Fluctuations in stock prices would be caused by differences in the evaluation of sectors or possible demand, but prices would likely be the result of the evaluation of the actual operation of the companies. Methods in valuation based on the actual business are commonly articulated to fundamental analysis, and involve calculating some multiplier from current performance over time.65
The second answer, relative pricing: whatever people will pay for the stock. This is relatively straightforward, after all, Mr. Market, Graham’s anthropomorphic character, will provide any number of quotes. Methods for tracking the progression of stock price quotes would do double duty tracking both the price of shares and the value of the company.
Some might say that social network firms are unicorns, that they are different, calling for a new theory of valuation to deal with their prices. Economist John Cochrane argues that the returns for firms financed by venture capital are not dissimilar from those of other firms particularly true as firms reach the mezzanine level (just before IPO).66 These companies often resemble more traditional firms; this resemblance is important as it renders strange startups familiar. Reduction to the balance sheet is a scary move for fantasy life. It only makes sense that social network firms engage in escalating shows of futurism and even seemingly wasteful project development.
Discounted cash flow and relative methods for valuation offer a method of valuing startups (and most social networks) as if they were traditional businesses, like a steel mill. David and Michael Goldenberg proposed a method for calculating the value of options on the future growth of startups as a derivative, rather than as a company as the future possibilities for a firm like this are so probabilistic.67 If companies become their stocks, a mathematical model of the future of a startup would suffice. If this method were to be successful, the liquidity of the startup market could increase and prices could behave more like stock prices as they would be increasingly tradeable: a positive feedback loop. This might be good for capital formation, but it begs the question of building a business. Moving toward derivatives of possible future business is not entirely unreasonable; the scale of the market is increasingly tied to the trade in derivatives, rather than the firms themselves.68 Black-Scholes models for valuing social network companies can also be relevant, although they tend to presume that the investor is going to model the price of the stock going forward.
Derivative instruments are reflections of reflections. These typically take the form of options and futures contracts. For Benjamin stock exchanges and gambling parlors were appealing as they played with time, just as commercialization and fashion played with objects.69 These are all parts of the same aesthetic game. Derivatives open the possibility of time travel and the excitement of making bets in the past, present, and future. Options can also have practical purposes. An option to buy raw materials at a fixed price could be very helpful for a company exposed to rising materials costs. Fuel hedge contracts can be helpful for an airline during spikes in the price of jet fuel, but painful when the price is low. With more sophisticated models for option pricing and creative methods for portfolio construction, the relationships between assets and options become far more interesting, confusing, and lucrative. Many financial instruments offer a chance to buy a change in the mathematics, not by switching out the equation, but by manipulating the variable t: time. Beyond simple European (single moment of decision) and American (continuous decision period until expiration) and exotic options taking many forms.
Dual temporality highlights the distinction between evaluation and valorization. François Vatin argues that a central issue in the study of asset valuation is the tendency to conflate the evaluation of a positon with the valorization of that idea; the value of the company cannot be separated from the aesthetic and moral judgment of that same interest.70 Vatin leverages the distinction between evaluation and valorization in the French language to recognize the distinction the cognitive work of valuation and the affective dimension of the work. Evaluation is backward-looking and forensic; valorization is epidictic and forward-facing. Although option-based pricing may not be common in pricing startups now, it is a critical idea for understanding the market writ large. Valuation often is sold as evaluation. After all, these derivative-driven decisions are a leading factor in the decline of the NYSE. Dual temporality is one of the more important affective dimensions of the contemporary market.
Reaching agreement on processes for valuation seems far off. Critiques of ideas like technical and fundamental analysis are presented at length in the introduction. What those critiques mean here is that we must understand valuation as an aesthetic practice that is articulated to abductive reason: truth is translational and probabilistic in the world of stock investing. Transfers of value, to use Boltanski and Thévenot’s terminology, are always already taking place.71 Valuation specialist Aswath Damoardan argues that implicit assumptions, rather than explicit data, differentiate valuation models.72 The state of the literature is that there is no concrete external solution to the problem of valuation; there is no one right model for either intrinsic or relative valuation. This should not be a surprise: if valuation was transparent deriving actual values for securities would be a simple matter of mathematics, not a complicated matter of faith.73 There would be no stock market without unpredictability. A world without beta (volatility) has no alpha (return). Calculation is an aesthetic in itself, not the truth of reality.74 Or to use Cochrane’s line: “The hurdles in asset pricing are really conceptual rather than mathematical.”75
Valuations for social networks can reach wild levels for little or no reason. If an assumption of the valuation includes the impact of the valuation providing the firm leverage to capture an entire sector, the valuation is clearly something other than an analysis of a current business. Instead of thinking about the valuation of a social network business as a financial valuation, it is important to understand it as an aesthetic valuation. Writing an entire section of examples ridiculous valuations would not be difficult; it would not do much for improving understanding of the affective logic of the market. More than missing the point, the game of pointing out flawed prices hinges on evaluation, not valuation. This is a recurring theme in this book—the political economy of social networks depends on the aesthetic and moral assumptions of investors, not the actual dynamics of a business or even the relative behavior of the stock market. Shifting toward the aesthetic and moral question of valuation also calls into consideration the idea of the valuation of things not strictly financial. Denominations provide a lever of commensurability. Dollar values can be easily compared. It is not simply that money taints the evaluation of things that should be valued otherwise, but that money itself has an affective sense that is competitive with other values, as was discussed at length in Chapter 1.
Not pictured here acquihire, or the practice of entering the valley of death for the purposes of failing as an audition for a more powerful company.
The key to understanding the politics of valuation for a social network is to read the legitimating narrative of the startup. The story of startup valuation is framed in the heroic terms “business development.” True believers are pitted against realists. There are two conceivable exit strategies: IPO or acquisition. The failure of the business, the most likely option, is not on the table. Typically, the value of these companies will not be known until their product begins to fit into some sort of communication market. These markets only exist at scale because of the network effects necessary to drive real value. In other words, valuation for any of these companies is nearly impossible because their products have yet to develop. Early investments, the lifeblood of the firm, are risky propositions as each round of investment dilutes the ownership of the founders. Overcoming the “valley of death” and reaching the mezzanine level are the key moments in the story. These are not merely phases, but identities. Investors who get involved early in the life of a company must be ready for the “roller-coaster” of adolescence, mid-life, and eventual old-age.76 Valuations at these different stages are tied to the future life and present management of companies and the people taking a great deal of personal risk to build them. Valuation speaks to the evolution of the story of the company over time, and to the existential position of the employees.
Valuing social assets
It is clear that Twitter is worth something. The task of managing the opinion of crowds has been worth a great deal of money for a century, if not much longer. Compared with the value of Facebook during their IPO process, the value of Twitter has been rather restrained, with the company only looking for a few billion dollars, compared with the tens of billions sought by their counterpart. Business pulp writers at the time of Twitter’s IPO were excited about the offering; Twitter may have been undervalued. At each turn the ways in which dreams of value are constructed are revealed as ruins, and those ruins turn toward the next idealized business. The critique of valuation hinges on the idea that it is not simply that rationality is bounded, but that people are all too often invested in the idea of their rationality being bounded in the first place. For reasons of face-saving, ideological commitment, and reactionary zeal, valuations for firms are designed for publics to attach their identities to those valuations as if they were a creed.
In the run-up to Twitter’s IPO a firm in Luxembourg filed a lawsuit against Twitter alleging that the price of shares in the company did not reflect basic financials and that this was in effect a synthetic market for a synthetic stock.77 For the most part the idea of a lawsuit arguing that a stock valuation did not fit the fundamentals for that stock is not a meaningful argument in this world—of course Twitter had a roadshow that established the value of the stock. To argue that this is anything other than routine would require a high degree of naiveté. After all, one accepts risk if they own a security. Valuations today are not based on the fundamental value of the company. With price/earnings ratios in the hundreds or even infinite (meaning that a firm has no earnings), the idea of dividend is unthinkable; there is simply too little money per share to even attempt to return it to the owners. At lower ratios firms can return money to owners of individual shares through dividend payments. These payments allow firms to disgorge themselves of excess cash and pay retirees through a tax-preferred channel. The only hope for owners of these stocks to make money is through a substantial increase in demand for shares, a price increase. If stocks were valued strictly according to their fundamentals, there would be no conceivable way for these firms to sell stock to anyone.
At each step in the process of constructing the dialectical image for the value of a stock there are a unique set of aesthetic markers for value. Monetization uses metaphor to aggregate small quantities into large masses. Securitization sanitizes the image of the firm, making it inhuman and technical instead of flawed, small, and human. Inhuman, technical judgment in this sense is not a reflection of reality but a description of a particular style.
By shifting the view of the pricing of assets toward a view of communication and performance prices cannot be figured as they are in the efficient market theory, even with a relatively weak formulation of the theory. Pricing is not merely limited by our bounded rationality but should be understood to be the result of a series of complex discursive processes. Deciding when to change prices, the prices to use, and the way to narrativize those decisions are artistic and rhetorical decisions. Restaurants used the passage of the Affordable Care Act to justify increasing the prices on their menus, even when there would be no particular reason to increase prices.78 Lost sales and brand equity are the result of the application of a political test from a political world to a public world of commerce. Given the rules of a conventional argumentative world the prices that are announced to consumers are supposed to reflect some combination of the price of producing goods, some margin, and perhaps a brand premium. The test of a good price would be to analyze the cost of the goods relative to other similarly situated offers and then to select on the basis of some combination of costs and benefits. Appropriate pricing strategies in the world of the social network bubble would be impossible, at least in as much as the test to be applied involves the present cost of raw materials, labor, and margin. The relevant test for value in the world of social media is not a return on investment, or a price/earnings ratio, or even the hope of some distant return, but an expression of the recognition of the will of the investor themselves. It is not enough to merely have money—it needs to have come from an IPO. Nylon, a fashion magazine, is quite right to add the hottest entrepreneurs alongside bands, indie celebrities, and along with other fashions for analysis prior to purchase.79 The rules of the market world analyzing social media firms have tests beyond the margin of safety inherent in the stock—they have a margin of cool.
Advertisements for ETFs from Blackrock, a major investment company, underscore this emotional immediacy. An ETF is intended to model of behavior of a larger market through a meaningful sample of securities or options. If the fund is properly balanced it should model the performance of a sector with no effort expended by the investor, and, if properly designed, the fund should operate at a relatively low cost. Blackrock touches on an important use of the ETF that is distinctly non-utilitarian: personal expression. Advertising an ETF hinges on the idea of the romantic individual. In their video advertisement introducing iShares ETFs, Blackrock used a montage of individuals expressing both their individuality and their opinions about what kinds of investments they should make. Midway through the video a man wearing heavy thick black glasses with carefully tended facial hair noted that his reason for using iShares was their capacity to use “his own ideas.”80 A woman singing in the background repeats the letter I in triplets. After a short description of the ETF product the image behind the logo of the fund shows a man embracing a child cutting to a musical performance with the narrator pushing home the core line for the product, “ETFs for the heart of your portfolio.”
Given enough properly structured ETFs one could go long or short on each aspect of their psyche, personality, morality, and aesthetics.81 Purchasing securities would not be about analysis of a single company or even the structure of a fund, but of the feeling of the owner about anything in particular. Much like the structure of a mutual fund, the ETF absolves the individual investor of the responsibilities for making particular decisions about which stocks to purchase, opting to rely on a statistical sample of shares in that place. The question presented to the person purchasing those securities is not about the fundamentals of that firm or a series of shades of gray, but a Boolean question about the future of an industry or interest. Up or down? The ETF literalizes the opinion aggregation feature of the market and in this sense it dissolves it as well as an index of the individual affect. It is not that the movement of stock prices reflects some selection of judgments about the underlying securities, but that prices of underlying securities are tied to judgments about something else. Worse still for the advocates of an efficient market, the sure scale of ETF operations could cause pricing distortions in the market, meaning that the impact of both conventional and expressive investors can create movements in the market they would ostensibly model.82 Even as the impact of high-frequency trading is beginning to wane (there is a maximum speed), new forces threaten the stability of the markets.83
The introduction of this book featured a discussion of Benjamin Graham’s allegory of Mr. Market that the anthropomorphic character used to describe capital market processes as random emotional outbursts. The communicative features of the system of valuation have been theorized before, yet the complex and complicated aspects of communicative decision-making processes are continually disavowed. If ideas like the random walk down Wall Street are taken seriously it is important to note that they are not constructed around the idea of the market as something fully rational, but something that is so complex with such bounded rationality that it is difficult, if not impossible, for it to be meaningfully modeled. In this sense, this critique of valuation as fantasy is in an important way more empirically grounded than a view of valuation as a transparent communication. The final act for the apparently rational investor is to create technologies that harness the power of mobs themselves to generate revenue. Investing in social media intellectual offerings is not a statement about the relative quality of the assets but an attempt to play the mood swings of Mr. Market, to fully embrace the formulation of ideology that Sloterdijk diagnosed as enlightened false consciousness.84 Some buy the stock as a form of expression, others because they are enlightened enough to make an expression about the expression. It is not simply that there are more people who want to invest, but that particular products have been developed that allow them to use their investments as a form of self-expression. The issue is not so much with the regulation of existing capital markets, or their relative transparency, but their democratization. There are simply too many people, too many mobs chasing after the same stocks. The transition from pension to the 401k drove money toward individuals; they put their money into instruments of their own choosing, thus the romantic frame. But how does the stock market avoid taking the role of the villain in this romantic melodrama?
Running alongside the social network bubble was the financial crisis of 2007–08 and the Great Recession. The most severe economic crisis since the Great Depression, the recession was driven by a combination of speculation, fraud, and wishful thinking. Entering into the discussion of causes of the crisis is difficult—there are many actors, each with a role to play in the failure of the financial system. Accounting for the causes of the failure is a difficult matter of scale—the relationships between firms and asset pools for shadow banking are so large and complex that credit and blame become political icons. The phrase “too big to fail” is the case in point. The size of institutions is one of the only meaningful levers for understanding the crisis. Size definitely played a role in the waves of damage across the economy if only because of the number of contact points a failing firm would have. Publics would be understandably incredulous that the size needed to cause a crisis would also be a defense of a firm, summed up in the expression “too big to fail.” Legitimation was at a premium.
Unemployment surged, the NYSE dove, and hours worked per week dropped to the lowest level on record. Confidence in the capital market should have been shaken to the point of shattering. Forty percent of household wealth was lost during the recession.85 Yet, just a few years later IPOs in flimsy social network issues were once again attractive. In Chapter 1, this was discussed in the context of what Paul Krugman describes as the “confidence fairy,” the pop market psychology version of the collective mood.86 The affective conditions of the bubble and the collapse are paradoxical. Thrift can turn toxic in a liquidity trap—and in a very real way the demand that investors find lucrative places to invest their money drove the development of even riskier investment opportunities. Saving and investing become ideographic goods. The interesting question is why these goods remain articulated to capital markets. How is risk aestheticized in such a way that the stock market continues to appear, and likely to be, a good option for investment? Understanding the ways in which social network securitization becomes sensible requires a reading of the public relations strategy of the market itself in the moment of crisis.
Investing in the Currency of Trust is the title for a campaign of online videos and interviews given by then NYSE CEO Duncan Niederauer in fall 2009. Following an argumentative structure that builds on the idea of the market as an important institution for life and governance, the videos rely on images of Niederauer speaking, images of the physical markets in operation, and the exchange building itself. These videos are explanations from the president of capitalism about the operations of a seemingly arcane system.87 The videos will be considered both as individual texts and as a condensation of an imaginary of what the stock market could be.
The first video, “Trust is at the foundation of how our markets work,” argues succinctly that the basis of a market system is trust. The critical element of this video is the move to assign the cause of the financial crisis to “unregulated” markets, absolving the authority structure of this market from culpability, and making the threat of an unregulated market, a trading state of nature real.88 The video makes an important distinction between the “markets that got us into trouble” and those that ostensibly did not cause trouble in the financial crisis. Distinguishing between these markets is the factor of transparency. Markets that failed were those that were seemingly opaque. To support the image of transparency the video accompanies claims of transparency with images of persons near screens and clear shots of technology in human hands without human faces. The market appears as a unified force with a distinct moment of judgment where Niederauer claims that the market knows that a wave of re-regulation is coming accompanied by an image and background sound of a crowd applauding. The technology of judgment approves. Niederauer speaks for all markets.
From the start of this narrative arc, the video acknowledges that there was a financial crisis, but keeps it relatively distant from the market mechanism itself. The issue is not that market logic itself causes bubbles and panics, but that an insufficiently technological version of the market causes failure. Trust is left to be a matter of human credibility, for now.
The second video frames the future of the NYSE with a strong pronouncement: “We are now a technology company.”89 A critical moment in this video comes in the third paragraph of Niederauer’s spoken text, where he directly compares the value of the New York Exchange to the value of two data centers. Niederauer concludes in favor of the value of the data centers; they are “the two most important hard assets.”90 Here the figure of the data center, which is never visually represented, is more valuable than the physical space being presented in the visual. The argument goes further, arguing that the “that technology, properly deployed, helps us with capacity issues, reliability issues and stability issues all of which are building blocks of creating that trust so that the investors know when they come to the market, we’re going to be here.”91 Equipment has the conditional possibility of producing trust because it offers the possibility of connection. The issue isn’t that the investors get access to data, but that it allows the investor to “come to the market.” Metaphors for technology are mapped onto the historical metaphors for approaching the space of the market in the historical sense of the market. Approaching the market in this world does not depend on approaching other people, but on connecting with a server system.
In the third video, Niederauer rehearses the history of trust in spatial terms. History for the NYSE is thought of as a series of acts that heal the wounds of national trauma. The Great Depression, the world wars, and September 11 are framed as a series of events that forced the market to evolve; “you can trace a parallel course with the history of the country.” As Niederauer narrates through the crises, images of crowds in black and white replace the image of technology. The crash of 1987 is framed through a shot pushing in on the face of a man who is clearly shouting, juxtaposed with a mustachioed trader “watching 25% of the market’s capitalization taken out in one trading session.” An image of a man holding his head in his hand ends the montage. A shot of a flag historicizes world wars; the trauma of September 11 appears with a man leaning on another for support with his opposite hand drawn to his mouth, finishing with a sustained shot of a man holding an 8.5 by 11 inch piece of paper with the message “We’re Still Here!!!” Emphasis shifts so quickly in the video that the elision of the Septembers (2001 and 2008) flows together smoothly. He could be just as easily talking about either event, or both, when Niederauer concludes somberly that events literally produce “scar tissue.”92 The financial crisis of 2008 is so completely sublimated into the long history of stock market trauma that the appearance of actually existing history disappears in a split second. The video theorizes time diachronically with the response to these scaring events being the next step in an “evolution,” which is taken just a sentence, five seconds of video later, to be making an investment in information technology. Turning to the history of the future, the person responding to crises in that future is supposed to be required to understand more about technology and social networking to ensure that the market is accessible to possible future users.
History is so tightly bracketed into the world of the freeze frame that it is almost completely out of sync with the ongoing circulation and flow of the present. John Lucaties and Robert Harriman argue that the study of iconic images needs to remain attached to a theory of circulation in as much as an iconic image is produced by the complex system in which it circulates.93 A freeze-frame is never really frozen as it is very much alive with the energy of the moment in which it was captured, and the moment it is seen. The stark contrast in visual styles (especially in color temperature) makes history distant. Historical crises exist in a different place than we trade stocks now. The freeze-frame makes it possible to create an alternative world of circulation with such different aesthetic rules that history has broken.
The fourth installment argues for the capacity of the NYSE to “distill” the views of those it represents.94 The market here is positioned almost anthropomorphically as if it was the real embodiment of its corporate charter, as an agent in political discourse. Graham’s Mr. Market becomes tangible. The most important thing this segment does is to reframe the history of the market, claiming that for the full 200-year history of the exchange that it functioned as a unified voice, an assertion that would not seem to square with the loose association envisioned in the exchange’s historical documents, “Because of the trust we have engendered over our two-hundred year history we will be listened to, and we can use that voice on their behalf very effectively.” Duer, the nineteenth century, and almost all history of the market are erased. History in the fourth video depends on the figure of the market, and the more extreme idea that whatever the market is doing is the active creation of a dialectical social process, or a judged argument. What is particularly curious about this argument is the opening of the video goes out of the way to argue that the scope of the market exists beyond that of the nation state, using flags from other countries and claims about global scope to frame the space of the market as being in a virtual place that is not located in any given country. Whatever argumentative capacity the market would seem to embody is directed toward transnational governance.
The rhetoric of distillation and advocacy takes on another important dimension as it implies a capacity for judgment. There are likely any number of different views that companies across the earth might have regarding regulation and policy. Somehow, in some way, the NYSE supposes that it has created a form of democratic aggregation, the means by which this democracy functions are unclear, invisible and species agnostic. Things (algorithms) as well as people argue in this polity. The history, the market, and its figural power allow it to give the imprimatur of legitimacy to that which it interacts. When combined with the narrative of capital market convergence that Niederauer is promoting, it becomes clear that the approval of a capital market is being sold as something akin to the approval of a referendum of humanity.
Fifth, Niederauer defends the involvement of the government, the title argument, “The Government’s Involvement Was Critical If We Were Going to Restore Trust.” Adding government action increased the credibility of the market. Government intervention is framed as the thing preventing systematic “collapse.”95 The risk of collapse is important, as it is homologous to the vision of the unregulated market in the first video. Both return to the vision not of an inefficient market, but that of no market, as if the question that could be staged is between this current form of market system and the state of nature. Cutting back against the vision of stability and the figural interaction with the government as an audience in the fourth video, the fifth video uses the figure of the investing public as the site where a lack of confidence could be registered. Niederauer takes the involvement of the government as a solution to the crisis being created by “what the media was telling you,” turning toward minimizing both the importance of regulation and the existence of the crisis itself as something irrational, existing in discourse alone. The role of the government going forward in this imaginary is in creating a regulatory environment that feels good for the public.
What this video does so effectively is to avoid any engagement with the idea of a bailout, instead framing the conduct of the government as “semi-nationalization” that generally agrees with what actions would be undertaken by the exchange itself. In the fifth video there are two different discourse communities with different exigencies—the public who needs to be constantly assured that they can trust the market, and the government who is already persuaded that they should trust the market. The identity of the third audience—the audience that depends on evaluation of technology to facilitate trust—is strangely absent from any of the videos.
Finally, in the sixth video, space is remapped; Wall Street is displaced for the image of the earth. “Our world isn’t just changing, it’s exchanging.”96 This second climax connects the data centers and the figure of a global world, which is new to this video. This video emphasizes the continuous change in financial markets and doesn’t mention the NYSE until the final line, which argues that the New York exchange will be at the heart of future world markets not because of the space in New York, but because of the data centers. It is important to remember that Hannah Arendt focused on the image of the earth and the launch of Sputnik as the marker of a new technological age, not on the detonation of the atomic bomb. Restarting with the image of the earth has a similar rhetorical function here—it marks a change in epoch.
This video is especially tricky for reading because of the appearance of a new discourse of collaboration. The way that capital allocation and exchange are framed in this video inverts the role of Hobbesian figural logic that normally frames the operation of capital markets. Niederauer describes this in the passive voice, that we find ourselves in “the collaborative economy” into which the world has put “itself.” The sine qua non of collaboration: “Nothing is more collaborative than bringing a bunch of buyers and sellers together and allowing them to make investment decisions.” The decision that allows us to become fully democratic and collaborative is not tied to the future or the polity, but to the ways in which a 401k should be allocated. The end of this analysis is global connectivity. That is the “core” of an exchanging world.
Visually the videos share an aesthetic and many individual shots. The videos have three primary visuals; those of Niederauer speaking, of the space being photographed, and of traders moving around the floor. The visuals of Niederauer speaking always have a very shallow depth of field: you never see the market apparatus behind or around Niederauer. When he is presented, he is singular, the only thing in focus in any given frame. This is critical, because the visibility of the human actor intervening is the visual exception; nothing else is visible when a speaking person is. The visuals of the spaces are in focus, but are punctuated diegetically with the flashes of cameras, and non-diegetically with artificial camera flashes for images like the outside of the building. The viewer is positioned as a part of a crowd taking pictures. Viewers of these videos are positioned as spectators. This use of visual noise marks the role of image both for the vicarious spectator who receives the image and to call attention to the idea that this space is worth recording on its own terms.
When traders on the floor are represented, they are never in the flow of natural time. The people on the floor are always moving in fast or slow motion, while the technical apparatus of the room (trading posts, monitors, flags) are in focus. The space is always intelligible; the humans in their space-time are never intelligible, except for Niederauer who must be shot in his own temporal space, with nothing else in focus. This is an overt image politics that privileges the built environment over the operations of the people. We never have the ability to see the production of trust or the work of rhetoric in the scenes, as it is made invisible. Judgment and legitimation are secondary to technological capacity. Paul Virilio would suggest that this use of acceleration is a fundamental aspect of modern design—namely that the same structural errors are repeated under the banner of acceleration, with the good of increased speed cover the errors.97 Adequate regulation managed to soften the impact of the boom–bust cycles of the nineteenth century that made the necessary accidents of these systems, the booms and busts, harder to discern. Bubbles are the worlds of traders. The market technologies of the mid-twentieth century were particular adroit in their ability to defray crises; these market technologies were political categories and rules. Changes in the 1990s and early twenty-first century allowed dramatic acceleration. Scale and speed are linked—bigger requires faster. At the same time, this is a very particular kind of speed. Instead of going with tried and true technologies that Niederauer argues is likely inevitable, forms of rulemaking, the public relations campaign emphasized electronic technologies. After all, the fastest technology is always preferable in the current design vernacular. The return of regular recessions and boom and bust cycles should be no surprise—they are the necessary accident of a system that is in acceleration.
At no point in the entire arc of the film series was the idea of market speed discussed—scale, and the prospect that scale implies democratic unity, overrode a discussion of how intermediary market practices might take place. These markets were designed to have a very particular kind of failure, an accident that comes through the inability of humans to exercise judgment.
Human judgment and stock picking
In the world of the NYSE’s publicity the market exists both in a world of technological perfection and in human creativity. The most fascinating piece of evidence is the framing of the inclusion of human judgment as the exception by Niederauer, signaling the transfiguration of the humanistic basis of the market for technological one. Yet, this transfiguration is never complete—the human and the machine interplay to support each other. Rebuilding trust depends on the best, and worst, features of humans and machines. By playing between the human world of the stock market and the technological alternative time, the world of the stock market takes on the quality of the future anterior—that which is yet to come. This is an important idea, especially as it relates to social network firms. The monetization models proposed by these firms are forms of arbitrage and extraction that ultimately are not particularly special. There is nothing about running a reasonably sized television network that should justify these valuations. The question is not about the present, but about the future. The promise of the future has been a central aspect of American political theory. Social networks could collect information about human interactivity and use that information to facilitate a new world of exchanges and transactions that would make it possible to perceive the future of interactions now. The stock market functions in much the same way; through technology it is possible that the market rather than being a troubling agent in history is merely a technology that holds out the possibility of a different future time. As such stocks representing social activity in the future tense are a perfect fit for this market; it should be no surprise that these stocks rise highest.
Both the perspective on the market as a struggle between inhuman actors and a community sustain the digital economy. The technological market wouldn’t be palatable without the reference to the figure of the market as public, and the market as civil society wouldn’t be credible without a quantitative, technical market analysis. In this way, the two views of the market are interdependent. The way that his interdependence is structured makes it scarcely possible to find some third language that might re-describe the foundations of the conflict as long as time is both contracted and elongated through the visual grammar of the market.
This capacity for shifting between metaphors has provided a deep well for capital markets to legitimate themselves. If the trust only appears legible in a world of the machines—in the state of techno-economic nature as such—then forms of credibility building that depend on a reference to a concrete, built human environment would be ineffective. Mechanical trust is articulated to a magical other place, the temple of Wall Street. Niederauer put the issue in stark relief with his comment to Forbes, the reason why the market floor must remain open is because it is the only place where human judgment can intervene into the market. If the NYSE were to invest in the economic community, reliability and capacity issues wouldn’t be understood as the “building blocks of trust.”98 The alternative is a transformative, world-building power of the image of a market as civil society offers that powerful, historically tested rhetoric that literally makes markets. The aesthetic of the market works so well because it does not collapse into mere community. For internal audiences, this campaign allows the uncontrollable world of markets to maintain their articulation to the locus of control in New York. The aesthetic logic of the old stock market, the temple of Wall Street, remains if only to give cover to the industrial logic of market design.
Securitization can take the empirically meaningful bits of the world of monetization and connect them into a meaningful scaled product. Shifting the affective register of the social network bubble into the capital market offers new possibilities for legitimation and disavowal of potentially flawed business processes. The stock market has already judged the underlying quality of an asset or issue and found it worthy. The dream of big money retroactively makes monetization seem reasonable—when the capital from the prospect of scale encounters romantic individual fantasy they cross-pollinate. IPOs come as a form of wish fulfillment. The good guys win big in this story when they engage a carefully manicured dialectical financial institution. Choices of platform and valuation model are profoundly affective.
It takes only a few minutes watching CNBC during the day to see the total lack of energy on the market floor. The remaining stock brokers lean, barely milling about, acting as extras on the market stage. In recent years the race for increasing speed facilitated by automated trading has taken center stage as a topic for criticism. The world of transparent markets with accurate, hard information may not be long for this world. There are no necessary aspects of securities trading that require that prices be public, reports accurate, or parties known. The histories of the market posed by Sobel and others take a trajectory that is suspiciously akin to new media history—they presume that the new market supersedes the old with increased transparency.99 The mid-century market, with clean lines, and the late twentieth-century market with the screener aesthetic are not the end of a historical process leading toward transparent markets. Beyond the NYSE there is a world of markets that exist in the darkness without meaningful public oversight or even the pretense of a community of friends. These are fully immaterial markets.
Dark pools are curious as they provide many of the same functions as conventional stock markets, and may even enhance some properties of transaction facilitation.100 The question for this research is how capital markets continue to retain their layer of thin legitimacy even when that legitimacy should have dissolved in the acid of market volatility. Analyzing the hedging models taken by large actors on invisible markets is a laudable research project that surely receives a great deal of attention. Much like the ways in which the e-trade aesthetic disarticulates stock from the stock market, dark pools break the necessary relationship between capital formation and capital markets. Securitization in the dark pool loses track of all but the price quote itself. Pools for alternative instruments pretend that these gadgets are somehow as stable as the stocks of old. This is surely preferable for professional traders working at incredible speeds with massive volumes. Yet as long as the stage of Wall Street is intact, legitimation will flow.
Obituaries for the NYSE are now written regularly. Emily Lambert, writing in Forbes, argued that the NYSE was killed by the replacement of capital stock activity with derivatives.101 For Lambert, the NYSE remains only as a brand, which is “pointless.” A proper eulogy for the market could inspire the next generation to create new, better markets. Felix Salmon’s prognosis came on the level of legitimation—if the NYSE does not appear to be a meaningful investment mechanism for average people, it loses whatever traction it had to avoid regulation.102 Goldman Sachs and many other large firms no longer maintain floor business at the NYSE.103 Insiders already viewed the floor as “vestigial,” and as Michael Hiltizk reported in the Los Angeles Times, the floor was “not even good for PR photos anymore.”104 CBS MarketWatch described the use of floor images as deceptive. Legitimacy is thin; images of New York patch the holes.
Insisting upon the creative narrative of capital formation, securities can be sold through narratives of founding and scalability. Scale allows a high-modern imagination of the relationship of the firm to the economy which obfuscates everyday relationships and media use, just as it encourages a particular feeling that is the material of markets. Gamification of the financial markets, when combined with the aesthetics of industrial design, creates new well of legitimacy for the stock exchange, even as the underlying conditions of the market deteriorate.
What this means when the political economy of social networking shifts from the startup to the mainline firm is still an affective investment. Monetization of current transactions turns toward securitization of future returns. Social networks live and die by their potential returns on the market. The payoff for these firms, both affectively and financially, is in the cash surge of the IPO. Just as historical moves in and out at scale, the idea of a social network firm today moves between the monetization scheme on the individual level and the level of the imagination of the stock market over time. Facebook thus has two identities: the purveyor of baby pictures in everyday life and the index of possibility for the market self across time and space. Although others are not positioned identically, the social network segment as a whole sits in this powerful position.
Understanding the longer life of these companies depends on understanding the discourse of the interaction between these firms and the economy as a whole—or the discourse of disruption.