We've been thinking a lot about the role of business models and economic incentives in building humane technology. In this Catalyst, we’re digging into alternative economic models and expanding upon a recent podcast conversation with Mara Zepeda and Kate “Sassy” Sassoon of Zebras Unite.
Mara and Kate have proposed a humane alternative to tech unicorns – the tech zebra. We explore how incentives are fundamental to business models and how shifting incentives can usher in more humane tech.
INCENTIVES ARE ESSENTIAL
Big tech platforms are incentivized to prioritize shareholder profits over the public good.
One of the biggest sources of this incentive structure is venture capital – high-risk, private equity financing granted to early-stage companies with high-growth potential. It is granted to startups with little to no collateral that end up failing 90% of the time. Because of this, venture capitalists expect their companies to maximize returns, as they rely on the successful 10% to make up for the financial loss of the other 90%.
Since the early '90s, venture capital has grown as a financing model for tech firms, enabling them to operate massive losses for extended periods in the hopes that they eventually grow into tech unicorns. (In fact, “tech unicorn,” the term for a privately held startup valued at over $1 billion, was popularized by a venture capitalist, Aileen Lee less than 10 years ago.)
Moreover, shareholder primacy – the idea that corporations exist solely to maximize shareholder value – has been the default business ideology for decades.
Due to the high-risk, high-reward environment of venture capital and the precedent of shareholder primacy, most tech companies can’t “afford” to build humane technology if it would jeopardize maximal growth and returns – and future financing rounds. This means that even if a business product or service strives to benefit society, the financing structure can create massive pressure to make choices that aren't in society's best interest.
This is where the zebra comes in. Billion-dollar silicon valley unicorns follow a business model that incentivizes shareholder value at all costs. On the other hand, zebras' business models adhere to principles of mutualism, shared property, and multi-stakeholder value.
Mara Zepeda and Kate “Sassy” Sassoon explain that the key to moving from a unicorn to a zebra model is to change who has control over companies. To shift power structures, Mara and Kate recommend transforming both who is incentivized (ownership) and how they’re incentivized (governance).
The chart below shows how zebras differ from unicorns in their “why,” “how,” “who,” and “what”:
What would it look like if we designed some of today’s largest tech companies as zebras? Here are a few ideas:
- Twitter users, who generate the content that drives Twitter’s value, could be owners. In 2017, a group of collaborators, including Nathan Schneider, launched a campaign to #BuyTwitter. #BuyTwitter made a comeback after Elon Musk's recent Twitter bid.
- Airbnb hosts provide the assets and labor that enabled Airbnb to grow globally with reduced costs. A zebra version of this tech company would reward hosts for their risk and labor by giving them shares in the company.
A few examples of zebras in the wild:
Many people question whether or not these smaller-scale solutions can solve our world’s grand and expansive problems. Lessons from actual zebras can serve as inspiration. In order to protect themselves from lions, zebras band together in a crowd called a “dazzle.” Similarly, creating a humane future is not going to come from one enormous entity, but instead, from many smaller-scale solutions.
WHAT WE’RE READING, LISTENING TO, AND WATCHING
On Tech, Democracy, and Elections
- Sheera Frenkel and Cecilia Kang, authors of The Ugly Truth, reveal how Meta (Facebook) has deprioritized work on election integrity to focus on the metaverse. In light of this, Katie Harbath, who formerly led election policy at Meta, shares what she would like to see tech companies, regulators, civil society, and media do ahead of elections: 1) plan and do research early, so you can identify gaps with enough time, 2) pay attention to company updates, such as process changes from prior elections, and 3) define success.
- The Indian government has been leaning on its “hostage-taking laws” to order social media platforms to remove posts. Human rights observers are concerned about how the laws limit freedom of expression and are being used to censor journalists and dissidents. In response, Twitter recently decided to sue the Indian government. The lawsuit could have far-reaching implications – both within India and globally – setting a precedent for policies that support either digital authoritarianism or digitally open societies.
- In “Meet Three Americas,” David French reminds us that the binary analysis of America – red vs. blue – is missing the perspectives of the “exhausted majority.” While “the radicalized American is in my Twitter feed,” he writes, two-thirds of Americans are “fed up with polarization, forgotten in public discourse, flexible in their views, and still believe we can find common ground.”
- The recent U.S. Supreme Court ruling West Virginia v. EPA requires federal agencies to seek Congressional authorization for “major” decisions. Commentators note that the repercussions of this decision will likely extend beyond the EPA and include all agencies’ abilities to regulate, including those taking aim at tech companies.
On Humane Tech
- As part of our Foundations of Humane Technology course, we invited six community members to share the platforms, apps, organizations, and initiatives they’re building to catalyze a more humane future. Watch the talk on our YouTube channel.
- In “The Good Web,” Ethan Zuckerman calls on us not just to fix social media, but to build social media that benefits society. He outlines four visions for “the good web” – the centralized web, the deplatformed web, Web3, and decentralized social networks – and the lessons we should learn from each of them as we reorient our focus on building better social media platforms.