The growing importance of data-driven innovation rents

Intellectual monopoly power has the potential to expand without limits in the digital economy. Chapters 7 and 8, on Apple and Amazon, respectively, elaborated on the traits of a specific intellectual monopoly that bases its continuous innovations and business diversification on monopolizing access to (big) data. These data are transformed into digital intelligence by processing and analysing them with machine learning algorithms. Machine learning is a general-purpose technology (Brynjolfsson et al., 2017; Dosi & Virgillito, 2019), and its most popular approach - deep neural networks - can even be considered as a general-purpose method of invention (Cock- burn et ah, 2018). This approach allows algorithms to keep learning by being continuously fed with new data. Resulting digital intelligence becomes an intangible asset that orients business and enables innovations. Tech giants’ accumulation depends on the appropriation of data-driven intellectual rents.

Centralizing and analysing constant flows of data is not an entirely new phenomenon. However, it did not have the reach it achieved since the development of different technologies, usually bundled under the name Industry 4.0, that enable the collection, storage, processing and analysis of big data.

Digital intelligence’s potential would not have been unleashed without 1CT infrastructure, from supercomputers in datacentres to telecommunications, with 5G expected to take the data value chain to an unprecedented level.

Beyond digital economy paradigmatic corporations, data-driven intellectual monopolies are emerging in multiple industries. Chapter 9 explained that State Grid Corporation of China (SGCC) gathers and processes data with artificial intelligence for its smart grid. Although it comes from a traditional industry, far from ICT, SGCC is among top organizations in artificial intelligence patenting (World Intellectual Property Organization, 2019). Big pharma companies are also adapting to the digital economy, aiming to expand their legal intellectual monopoly (see Chapter 6) with data-driven rents. Even if they are still in an early-mature stage and far from fully acknowledging the potential of artificial intelligence for drug discovery, they are investing in R&D digitalization and artificial intelligence (Schuhmacher et al., 2020).

Other early examples of data-driven intellectual monopolies include genomics corporations like 23andMe and Myriad that make businesses with genes’ databanks (Pistor, 2019; Rose & Rose, 2014). But probably the earliest example of the power and surveillance potential of monopolizing and centralizing access to data is given by the US government itself. Crypto AG was a company secretly owned by the CIA and, in its beginnings, West German intelligence. Since 1970, Crypto AG sold encryption devices to 120 countries, including Iran, India, Pakistan, the Vatican and Latin American (democratic and dictatorial) governments. The devices were produced in such a way that the US and German spy agencies could break the encryption codes and illegally harvest and analyse encrypted messages.2

To further elaborate on data-driven and other forms of intellectual rents, we extend Marx’s ground-rent concept in dialogue with Veblen’s notion of predation in the next sub-heading.

Marx on rents and Veblen on predation

Rent, for Marx (1894), means that the landowner appropriates a portion of total surplus value precisely because she holds the land, mine or oil well title. Veblen (1899) conceptualized predation as a direct manifestation of superior force. It is quite straightforward that landownership provides means to exercise such a direct manifestation of superior force as far as land is indispensable for farming.

Besides differential rents, Marx (1894) explains that even the worst quality land in use yields absolute rent, which is a monopoly rent. For the tenant to pay the landlord this rent, the former must sell agricultural commodities at a price higher than the production price or otherwise sacrifice its own profits, so absolute rent is a form of value appropriation (redistribution) in the same sense of intellectual and financial rentiership.3 Furthermore, Marx’s definition of landowners can be easily extended to rentiers in general:

No other social class lives in so extravagant a manner; no other class claims such a right as this does to a traditional luxury in keeping with its ‘estate’, irrespective of where the money comes from; no other class piles debts upon debts in such a light-hearted way.

And yet time and again they fall on their feet - thanks to the capital of other people that is put into the soil and yields them rent, completely out of all proportion to the profits the capitalist draws from this.

(Marx, 1894, p. 859)

This quote resembles the idea of predators, as presented by Veblen (1899). According to Veblen, the basis of a predatory community is “the relation of superior and inferior, noble and base, dominant and subservient persons and classes, master and slave” (Veblen, 1899, p. 184). In all these cases, there is a direct or personal relationship between predator and prey, which was formally absent in the abstract idea of markets as voluntary encounters of buyers and sellers.

The resilience of a predatory relationship in contemporary capitalism differs from its archaic form because it now' takes place globally and is extended beyond social reproduction to knowledge production. What both forms of predation share is, in line with Veblen (1899), a direct manifestation of superior force. Intellectual monopolies exercise their superior force against different types of subordinate organizations.

Why is it useful to distinguish between rentiership and predation?

While predation is a direct relation of spoliation, rentiership results from a distribution of total surplus value between capital enterprises generated by the assetization cum privatization of resources (land, knowledge, data, etc.). They are two forms of exercising superior force, but the nature of the relationship differs. Predation supposes a direct or personal relationship, an explicit or implicit sign-up contract between tw'o parties w'here one party solely decides the contract terms. Rentiership, in turn, does not necessarily suppose such a contractual agreement. Table 10.1 summarizes all possible cases providing examples for each of them.

As it becomes self-evident from Table 10.1, there is no such process of pure standard capital accumulation because it assumes that knowledge remains a common stock and that there are neither financial assets nor private land ownership. In fact, capitalism unfolds as a combination of capital accumulation, rentiership and predation.

Table 10.1 The intersections and differences between rentiership and predation

Table 10.1 also highlights that predation and rentiership sometimes coincide, but rents can be collected without an underlying predatory relationship, thus based on an indirect relation of spoliation only mediated by the (impersonal) market. Besides appropriating value from their production networks, intellectual monopolies collect rents from their in-house innovation activity that is either protected with IPRs or kept secret. Here, intellectual monopolies garner rents from monopolizing access to knowledge, but without establishing a direct relation of (knowledge) spoliation with others. By curtailing access to an in-house invention, they indirectly deprive others from accessing to a portion of knowledge common stock but without exercising a direct relation of superior force with any other organization in particular. The intellectual rent is garnered when others access that portion of knowledge, either by licensing an IPR or consuming a commodity that required that knowledge to be produced.

Likewise, predation dose not always result in rents for the predator. Value predation takes place when there is a direct appropriation of value from a subordinate company. Intellectual monopolies define the terms of production and exchange, exercising a direct manifestation of superior force. They appropriate value by paying below commodities’ production price when they buy and/or charging commodities’ above it when they sell. Appropriated value is an appropriation of part of the surplus value produced elsewhere through a direct manifestation of superior force. The difference is not a rent but an unequal commodity exchange.

Finally, inside innovation networks, rentiership takes place by means of predation. Intellectual monopolies also assetize intangibles from knowledge produced in those innovation networks, thus directly manifesting its superior force with all the other participants. Since knowledge produced at the level of subordinate organizations is appropriated and turned into intangible assets by the intellectual monopoly, intellectual rents result from a predatory practice.

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