Bitcoin, Blockchain and Prosumption

Bitcoin (and other cryptocurrencies) and its underlying blockchain system are prosumption systems. There are no producers or consumers associated with Bitcoin and blockchain. All of those involved both produce and consume; they are prosumers. One journalist makes this absolutely clear in the case of Bitcoin when he points out that those who use the system are “both customers and owners of both the banks and the mint” (italics added). While the “customers” in this context are, in the terms of this approach, prosumers-as-consumers, those associated with the banks and especially the mint (the “producers”) are prosumers-as-producers. Bitcoin (and blockchain) involve both the production (especially by “miners” in Bitcoin) and consumption of data by all “nodes” in the system.

While all involved in Bitcoin (and blockchain) are prosumers, some are at times more producers (prosumers-as-producers), although they must also of necessity consume information. Such prosumers (actually their nodes) function as miners whose computers and their software compete to order new and unordered transactions into a block. They must also create a hash for the block. This involves solving difficult computational problems. Miners (and others) also serve as prosumers-as-producers when they verify transactions (e.g., creation of a new block) undertaken by others. They thereby help to maintain and secure Bitcoin’s network.

While all of this is challenging for the miner, it is easy for others (really their computers) involved in the blockchain to check (to serve as prosumers-as-producers) to make sure that the requirements are met.

As in many other instances today, it is not prosumption that is new. What is new are the technologies (e.g. Bitcoin and blockchain) that make possible new forms of prosumption.

While Bitcoin may yet fail for myriad reasons (a bursting of the current economic bubble, theft of large numbers of bitcoins, loss of faith in digital currencies, etc.), it fits well with various developments in the social world. One is the increase in prosumption and the technologies that expedite, even require, it. Others include the increasing importance of consumption and the spread of consumer culture, globalization, and rationalization (McDonaldization). Blockchain has a similar fit with contemporary social changes, but it is more likely to succeed even if Bitcoin fails. Blockchains, both public and private, have many other uses.  For example, they can be used to track almost everything including voting; use of, and payment, for music and art; and locations of cargo containers

 

The Decline and Fall of Independent Urban Brick-and-Mortar Consumption Sites

I recently blogged about the decline, at least in part because of the explosion in  digital consumption, of brick-and-mortar consumption sites such as shopping malls and various chain stores. However, a recent editorial in the New York Times (“No Shop Around the Corner”, November 20, 2017, p. A22) made it clear that I had failed to mention the decline of small, independent, urban, brick-and-mortar consumption sites. As a native New Yorker, I had noticed that decline several years ago when I stayed in midtown Manhattan. I went in search of the kind of local, “greasy spoon”, restaurants I had grown up with. I quickly discovered that they were nowhere to be found, at least in the midtown area in which I searched. Instead, what I did find were a number of outlets of various fast food chains.

The Times article focused on the “scourge” of store closings in New York City, mostly in Manhattan. While some those stores remain closed, others have been replaced by the outlets of national chains. Both alternatives adversely affect the distinctive nature and quality of life in New York and other large cities. Empty storefronts with large “For Rent” or “For Sale” signs cast a pall over the city (just as they do in shopping malls). Storefronts that become chain stores have a different kind of deleterious effect. Instead of a local shop, consumers are faced with a choice among the same kinds of chain stores found in many other parts of the United States, and increasingly elsewhere in the world. This has a homogenizing effect everywhere. The quite unique Manhattan of my youth is largely gone making it increasingly difficult to differentiate New York from other U.S. cities and even from the remaining shopping malls. The owners of the real estate on which Manhattan’s local shops are built are, at least in some cases, charging exorbitant rents that tend to force out small independent shop owners. The result is vacant shops. The landlords hope that a national chain (e.g. Sephora) that is able to afford the rent (or even to pay more), will open in those vacated locations.

Also worth mentioning in this context is the transformation the sleazy Times Square and 42^nd Street of my youth, an era and area that is currently being fictionalized in HBO’s “The Deuce”. Forty-second street between Seventh and Eighth Avenue has been transformed into a squeaky clean, Disney-like theme park with, among other things, a Disney theatre, a large McDonald’s, an Applebees, AMC and Regal multiplex movie theaters, and one of the Hilton’s hotel chain, with a Westin hotel just north of 42^nd street. In other words, 42^nd street is no longer sleazy, but it is also no longer distinctive. It now encompasses a similar mix of businesses to those found in many other locales.

Sleeping with the Digital Enemy: Salvation for Brick-and-Mortar Shops?

While many brick-and-mortar consumption sites are going bankrupt (Radio Shack, Payless), dying (Sears), or are long gone (Circuit City, numerous dead malls [see deadmalls.com]), several late 2017 articles in the New York Times suggested that it is premature to sound the death knell for brick-and-mortar stores.

Some brick-and-mortar consumption sites, most notably fast food restaurants, are not dying. In fact, they will continue to exist, if not prosper, at least until the day when technology is advanced enough to deliver burgers and fries to our homes digitally (e.g., that can be produced on our 3-D printers, or by even more advanced technologies of the future).  Many other kinds of stores (e.g. supermarkets) will survive for many of the same reasons. Furthermore, still other brick-and-mortar stores will continue to exist if for no other reason than the fact that many people will continue to feel the need to get out of the house and away from their computers, at least some of the time. Since consumption is, for many people, their major form of recreation, this will undoubtedly lead them to updated brick-and-mortar shops, malls, amusement parks, and the like.

There are also hopeful, but contradictory, possibilities for other brick-and-mortar sites such as, making them smaller (more focused, more personal and intimate) or more multi-functional. However, there is general agreement on the need to make such sites more experiential (for example, malls that have fewer stores and more restaurants and movie theaters; showrooms offering more personalized services and an array of amenities such as manicures and a glass of wine). Beyond that, such sites can move beyond a focus on brick-and-mortar shops and, among other things, transform themselves into “event spaces, classrooms, community centers”. While there is some promise in these changes, they seem, at best, dim hopes. The chief executive of Oscar de la Renta is quoted as saying that brick-and-mortar stores are no longer necessarily advantageous and in the second-tier markets they might be considered “millstones”.

The main source of salvation for brick-and-mortar stores is said to be augmentation with that- digital consumption sites- which have been, are, and will continue to be the greatest threat to them. The major hope for many of the brick-and-mortar consumption sites that continue to exist is in synergistic relationships with digital sites. While this will keep some brick-and-mortar locales alive, they will clearly be subordinated to the digital and on life-support. Further, that which is keeping them alive, at least faintly, is the very digital force that has been killing them and will continue to be fatal to them in the future. Brick-and-mortar stores are eagerly climbing into bed with their mortal enemy. If the alliance with the digital world does not kill brick-and-mortar sites, it will reduce them to insignificant appendages to the digital.

Also not offering much hope to the brick-and-mortar world are the material sites Amazon has created (bookstores, convenience stores) or purchased (the Whole Foods chain of over 460 supermarkets). They are destined to be an infinitesimal part of Amazon’s total business. They may be useful for experimentation, the application of the massive amounts of data collected by Amazon.com, and for new bodies of data on consumers, but they are not going to contribute much to Amazon’s bottom line. On the other hand, Wal-Mart will gain much more by its move away from its massive number of brick-and-mortar stores and in the direction of becoming a greater presence in the digital world.

Demonizing the “Founder” of McDonald’s: It’s Much More the System than the Man

Although it is rooted in the 1950s and the creation of McDonald’s, the movie “The Founder” is a not-so-subtle attack on ruthless Trumpian-style and –era business practices.

The “founder” in question is Ray Kroc (who never founded anything- not the restaurant, its system, menu additions like Egg McMuffin, the idea that the real money was in the owning of the land on which the franchises were built and the rent that came from it, and so on). After many early failures as a Willy-Loman-like salesman, Kroc was drawn to the McDonald’s brothers’ revolutionary new business model in San Bernardino, California because it had placed an unusually large order for several of the milk shake machines he was hawking. The brothers were happy with their modest success and had no interest in building an empire. Kroc did and to his credit he was willing to work hard and risk all- including his home- on the future of the business which he saw in franchising (another idea and system not founded by Kroc).

But Kroc, like Trump, was ruthless and unethical both in his business and personal life eventually lying repeatedly to succeed. He ultimately screwed the McDonald brothers out of the $100 million a year he had verbally promised to them, but had refused to put in writing. In the end, one wonders whether the deceit was worth it. True, Kroc became a billionaire but he sold his soul in the process. In addition, after his death his wife gave it all away, much of it to the Salvation Army.

The movie is strong on the system that the McDonald brothers created. Its essence is depicted in a neatly choreographed scene on a tennis court with a chalk-drawn and re-drawn floor plan of the restaurant. The system they created drew heavily on Taylorism and time-and-motion studies, as well as on Henry Ford’s assembly line. Indeed, McDonald’s pioneered the assembly-line production of burgers (and other foods) and the treating of its customers as if they were on an assembly-line (especially in the later drive-throughs).

Beyond the McDonald’s “system”, the McDonald brothers created high(er) quality burgers and shakes (both eventually compromised by Kroc), finger food that did not require utensils, a self-service restaurant that kept customers moving because there were no seats, and a clean restaurant and environment that discouraged teenagers from hanging around and making a mess and lots of noise.

Kroc also quickly recognized the value of the name and of the golden arches (also created by the McDonald brothers). As depicted in the movie, he saw a similarity between those arches and church steeples and courthouse structures. In my terms, he is depicted as implicitly recognizing that he was creating a new “cathedral of consumption”.

One of the major problems with the movie is the failure to address some of the larger issues that are part of the process of “McDonaldization”. These include the broader changes that contributed greatly to McDonald’s success (the post WWII growth of automobile sales and travel, the national highway system, and the suburbs) as well as the broader changes it has wrought, especially the McDonaldization of society and of many of its institutions (schools, churches, etc.). Also missing is coverage of the many irrationalities associated with fast food chains (adverse impact on health, the environment, etc) and of McDonaldization more generally (e.g., increased homogenization), as well as even broader issues such as the globalization of the chain, its basic ideas, and its irrationalities which all played a major role in the “globalization of nothing”.

In the end, the movie focuses too much on one “demon” (Kroc), but minimizes larger demons (capitalism) and totally ignores others (the McDonaldization of society and its many irrationalities). As is true in much of the popular media and its products, The Founder individualizes and psychologizes when it needs to “sociologize”.

Amazon.Go: New Heights of McDonaldization

Not that I can take any credit for it, but Amazon has unwittingly managed to wrap up much of what I have been thinking and writing about for the last three decades in one nice little material world bundle, Amazon Go. The prototype of this updated version of a convenience store now exists in Amazon’s new office building in downtown Seattle.

It is a highly McDonaldized setting in which, as in all McDonaldized settings:

• Its operations are very efficient (e.g. no checkout lines; just “walk-through”, “grab-and-go”, and “walk out”),
• It is calculable, with an emphasis on speed in getting through the store and offering quickly eaten finger foods
• It is predictable, specializing in pre-prepared meals and “chef-made meal kits”
• It makes great use of non-human technologies: smartphone apps to gain entry; sensors to keep track of what is being taken off the shelf and is purchased; automated technologies to total the purchases and to charge them to the consumer’s account. This is made necessary by the fact that few employees are likely to be present since there will be no checkout counter- a clear threat to the 3.5 million cashiers in the United States.
• The threat to jobs is one of the irrationalities of this rational system. It will help to further reduce the number of paying jobs (using technology similar to that used in driverless cars that is costing taxi drivers their jobs) and to add to the working class discontent that helped fuel the rise of Donald Trump, Brexit, etc..

 

From the point of view of consumption, Amazon Go is a place (a new means of consumption, or cathedral of consumption) to which people are drawn to consume. However, it is better thought of as a place (a means of prosumption) where people go to prosume, that is, produce what they consume. Consumption is traditionally a process where others, especially employees, produce in various ways what others consume. This has declined in recent years as there are ever-fewer employees to do such work. Consumers are required do an increasing amount of that work either on their own (carrying their own trays in fast food restaurants, gathering their own food in supermarkets) or with the help of new technologies (e.g. self-checkout and check-in systems). This is especially the case in online sites and stores, including Amazon.com, where the consumer does all of the work of finding, ordering and paying for a purchase. This kind of a system is more difficult to create in a bricks-and-mortar store, but Amazon’s Go, if it is successful and widely implemented, will be an important step in that direction.

Customer Service or Disservice?

Consumer Reports (September, 2014) offered a revealing analysis of the accelerating trend toward customer self-service, or one aspect of what, in my terms, is “prosumption as consumption”. Customers who engage in self-service are, by definition, producing as they consume. To its credit, Consumer Reports makes no bones about why self-service has been embraced so enthusiastically. The reason? “To save money”. For example, if customers themselves place an online order, the cost to the company is pennies, while ordering from a live agent could cost between $2 and $10. In most cases, the corporations involved do not pass the savings on to customers in the form of lower prices. When multiplied by thousands, if not millions, of transactions, such savings mean much greater corporate profits. While such cost savings and profits have long been possible, they have been greatly increased in recent years by new digital technologies and by consumers who are not only familiar with them, but greatly prefer using them to interacting with paid employees.
Why do consumers do this work without pay or economic gain of any kind? Among the reasons offered by Consumer Reports are consumers’ feelings of empowerment, the ability to handle transactions more quickly, and the possibility of avoiding contact with employees who are increasingly likely to be less than stellar in their work. In fact, because corporations much prefer self-service customers, they are likely to hire fewer workers of lesser ability, to offer little training, and to accept marginal performance of the job. While many customers are cognizant of the incapacities of service workers, they generally seem unaware of many of the costs of self-service such as the loss of human contact, the paid jobs that are lost because they are willing to work for no pay, and the dehumanization of their relationships with corporations.
Because of the increasing acceptance of self-service by consumers, some corporations have taken the outrageous step- with nary a peep from consumers- of charging them fees for handling tasks the corporations used to perform without charge. Among the examples are airlines charging customers $50 for a paper ticket, $25 for having the audacity to make a reservation by phone, $20 for asking for a receipt for an e-ticket, and a $10 fee for having a boarding pass printed out by an agent. Fees such as these are likely to increase in price and to proliferate in number and variety in the coming years thereby further increasing the costs to consumers and profits for the companies.
Profit-making organizations have discovered that they can increase their profits by cutting personnel costs and by exploiting consumers to an ever-greater degree. There are many more customers than employees to exploit, they accept their exploitation meekly and, indeed, they often embrace it eagerly. This system greatly reduces the possibility of class consciousness among the declining number of employees who are ever-more fearful of losing their jobs. Worse, the system can operate without fear of the development of class consciousness among consumers who are too diverse and self-interested to think of themselves as a class, to become a class, and to act as a class. As much as one might like to hear it, we are not likely to hear consumers utter the clarion call- “Consumers of the world unite, you’ve nothing to lose but your iPad”.

McDonaldization without McDonald’s?

McDonaldization without McDonald’s?

In its key U.S. market, McDonald’s sales and customer visits were down in the first half of 2014 and they were flat globally. That, in itself, is not terribly worrying to the company since such declines have occurred before and McDonald’s has always roared back. However, a recent survey in ConsumerReports (August, 2014) makes those declines much more worrisome for the company. A survey of the dining experiences of over 32,000 subscribers to the magazine showed that of 21ranked burger chains, McDonald’s was tied for last with Burger King. McDonald’s, like Burger King, had a score of 71. This compared very unfavorably to the top-ranked chain, In-N-Out Burger, with a score of 88. While McDonald’s customers were satisfied, they were not nearly as satisfied as the customers of all the other burger chains (except Burger King). McDonald’s also ranked last when customers were asked to rate burgers on a scale of 1-10 with 1 being the least delicious burgers they have ever eaten and 10 being the most delicious. McDonald’s burgers got a score of 5.8 (the next lowest was 6.6 for Jack in the Box) compared to the best score (8.3) at The Habit Burger (In-N-Out Burger was 2nd with a 8.0 score). Overall, the mass burger chains, those that are the most McDonaldized, tended to rank toward the bottom in both ratings. The same can be said other kinds of chains. Of the chicken chains KFC was at the bottom in terms of the taste of its chicken and the same was true among the Mexican chains of Taco Bell and the taste of its burritos.
McDonald’s (as well as the other mass chains) is in no immediate danger, but these data should lead us to wonder about its long-term future. Other retail giants have fallen in the past (e.g., Woolworth’s, Montgomery Wards) and still others are presently in danger of collapse (e.g. Sears). There will come day when McDonald’s falls, but given its global power and its public relations skill, such a collapse will not occur any time soon. Similarly, these developments do not spell the end of the process of McDonaldization. However, it may well be that McDonald’s position as the paradigm of that process is being undermined leaving us with the possibility of a new paradigm (In-N-Out Burger?). In that case, the lack of fit between the paradigm and process would be awkward, but whatever the new paradigm, it would still be highly McDonaldized.
One of In-N-Out Burger’s great advantages is the higher quality associated with using fresh hamburgers rather than the frozen burgers of McDonald’s and other large chains. The calculability dimension of McDonaldization points to the tendency to emphasize quantity rather than quality. More frozen burgers can easily be stored, shipped, cooked and served than fresh burgers. However these quantitative gains come at the cost of lower quality. In the end, a high degree of McDonaldization brings with it the tendency toward mediocrity. Thus, McDonald’s may be done in by the very process that bears its name, but that is not to say that chains like In-N-Out Burger (as well as others like Chipotle) are not McDonaldized. They are simply less McDonaldized in some ways and on some dimensions that give them various advantages over the most McDonaldized systems. The success of these somewhat less McDonaldized chains promises to reduce, but certainly not eliminate, the irrationalities of rationality (e.g., the tendency toward mediocrity) associated with McDonaldization.