‘Social Derivatives & Convex Commons’ w/Economic Space Agency & Gerald Nestler

This is the video uploaded from the Diffractions Collective and their featured panel that hosted Economic Space Agency & Robin Hood ‘DAO’ to discuss the nature of Social Derivatives, DAOs, Gaming, and Convex Commons. Below is also accompanying notes from Gerald Nestler who unfortunately was not able to join us.

for the DIFFRACTION COLLECTIVES workshop at the UROBOROS FESTIVAL, May 18,2021

Gerald Nestler

Even though their modern scientific-cybernetic manifestation has had a history of fundamental importance for nearly 40 years, derivatives went viral for the first time with the 2007 financial crisis. Journalists and pundits picked up on the theme and devoted telecasts, articles, and books (some of which bestsellers) to the application of financial technologies as well as the evident malpractice and economic injustice that resulted and the disastrous consequences of boom-and-bust cycles as well as algorithmic asymmetries. Scholars from a wide array of disciplines intensified their research and sought new approaches to critical finance studies. Artists, hacker communities and social movements ramped up efforts to oppose the repercussions of financial capitalism and develop new approaches with open-source models, knowledge commons, distributed money systems and citizen access, amongst others. 

Last but not least, distributed cryptoeconomic experiments are increasingly engaging with non-directional and multi-dimensional frameworks, protocols and applications of what I’d like to call the “derivative surphase” – to marry in one term the contingent phase space of volatility with the socio-material planes where risking together means recalibrating, leveraging and distributing choices, values, surpluses performatively – and therefore go beyond directional approaches to blockchain technologies (initiated by Satoshi Nakamoto’s Bitcoin white paper in 2008). To this end, the workshop, which I sadly cannot attend in person today, will doubtlessly offer remarkable insides from Economic Space Agency. In the following, will therefore focus only on what I conceive of the derivative condition to keep my contribution brief and won’t discuss decentralised blockchains, cryptocurrencies, tokens, smart contracts, and complementary systems – although I regret to miss this wonderful opportunity to discuss their potentials with you.

As regards the derivative, what surfaced with the 2007 crisis is the fact that the derivative has taken hold outside the arcane world of financial speculation. As a result, I argue, the future emerges today within a derivative paradigm: exploiting algorithmic processes that leverage the dynamic recalibration of contingent claims (another professional term for derivatives) is not only characteristic of finance. Rather, its performative language has become the template for technocapitalism (i.e., data-driven financial and platform capitalism) in which the future turns from an uncertain and unknown horizon to a trajectory that acts on the present. But lack of attention to this “history of the future” impedes critical reflection on finance and how it gained the power to shape individual, social and material relations. Hence, shedding light on the derivative is a matter of urgency if we want to grasp how data-driven and automated prognostics affect, appropriate, produce (and even pre-empt) actions, relations, promises and claims in the era of technocapitalism. 

To address the articulations of technocapitalism, the conceptual term the derivative condition focuses on the explanatory potential of artistic-activist research and intervention. In contrast to academic disciplines, which sometimes tend to emphasize their study area over others, this postdisciplinary and heterogenic approach tackles financial and other data-driven spheres from a multiplicity of perspectives, including epistemic, aesthetic, ethnographic, technological, economic and political ones.

The scope of this critical examination is therefore not restricted to finance. Rather, the derivative condition elaborates market terms, models, processes, infrastructures, and narratives in order to expand and reorient the reading to other – cultural, artistic and technological – materializations of the derivative. Some quantify their truth in probabilistic terms (such as bid data); some harness technowledge for emancipatory means (such as several experiments with blockchain and cryptocurrencies, especially decentralized complementary systems); others emerge as artistic, activist, or cultural expressions that correspond on conceptual or fictional levels (and sometimes oppose capitalism radically). But they are all still rarely perceived as based on, or closely tied to, the derivative – a fact that lends a unique perspective to the debates about our contemporary condition. 

The derivative condition on the one hand challenges key issues – such as the ‘black box’ logic of technocapitalism, its proprietary protocols and innovation cultures (often based on public funding and open-source developments in the first place); access/information asymmetries and their social impact; precarity as disruption of social achievements like labour rights; the production of volatility within the state-finance nexus to leverage competitive advantage by escalating economic and political conflict. On the other hand, the concept emphasizes the wealth of narrative and rendition – e.g., in open source communities, cryptoeconomics (or, rather, cryptopolitics), net and performance art, youth cultures, (science) fiction or multi-species ethnography – that reimagine other modes of what the derivative – and volatility and leverage as its central ‘anchors’ (if this word can be used for something so fleeting) – can offer us for sharing risks and making worlds together. 

Data-driven technocapitalism mediates abundance – notwithstanding the fact that accumulation and distribution continue to be highly asymmetrical, producing precarity and austerity for those it denies leverage. But it is the derivative intervention which facilitates the shift from scarcity to abundance in the first place. So instead of demonizing it, I argue that critical reflection can explore how we might access the intellectual and financial wealth absorbed by the neoliberal mediation machine; and how we disentangle the derivative to multiple potentials for ecologies of commons. 

In this respect, I refer to the term and semantic field of resolution, as a conceptual template as well as toolbox against non-transparency. 

The question I pose as an artist-researcher – in sort of an ‘imagined conversation’ with the late Randy Martin and in actual collaboration with comrades, allies, and those ‘cherished enemies who speak from inside the black box’ – is: what if we can produce derivative practices that effectively opposes the violence of the current condition, instead of rejecting derivatives simply as “financial weapons of mass destruction” (Buffett)? 

In this sense, I propose an affirmative approach based on fundamental critique. On the one hand, I read the derivative as the paradigmatic model of technocapitalism (which thus includes platform and surveillance capitalism). And on the other hand, the project explores how the derivative can be recontextualized as techne; to redistribute wealth and resources to populations in all their diversity instead of a tiny elite; and conceive it as a technowledge for cultivating care in economic terms but also in socio-cultural terms of sharing risks, needs and desires together; In other words, to reorient and empower the derivative for collective and common activities.


The Derivative Condition as a research project explores how the future emerges today within a derivative paradigm – the implementation of data-intensive, algorithmic processes based on scientific modelling, mathematical equations and data exhaust evaluation that leverage the dynamic recalibration of contingent claims (derivatives) at present. It conceives the derivative as a technopolitical innovation that introduced a new and pervasive level of exploitation. Thus, rather than merely critiquing its contractual and algorithmic applications, it seeks to diagnose the derivative as a paradigmatic force that shapes the economy, politics, and social reality. 

Financial markets are exposed to volatility, which corresponds to uncertainty. Risk, defined as “measurable uncertainty” (Knight, 1921), is the tool that keeps the complex circulation of leveraged capital operating (primarily by applying probability calculus to random or historic data). While the orthodox view maintains that financial markets are catalysts of future wealth (the promise of profit accumulation), it subjects the idea and history of promise to a quantitative archive of (meta)data whose “sense” is to claim, and leverage, the future at present. 

The derivative is situated in the future. The financial expert and philosopher, Elie Ayache, speaks of the derivative as the “technology of the future” because it is the quantitative equivalent of anticipation and expectation. At first, its dynamic recalibration regime revolutionized finance, as it offered new access to trading future outcomes in the face of uncertainty. But given the edge of finance over the wider economy (e.g. dominance of circulation over production; displacement of value by price; leverage as tool to inflate surplus value), its conceptual and acting force now far exceeds its field of origin. 

The Derivative Condition argues that the derivative, through the power yielded to financial markets by the capital-state complex, has effectively re-oriented not only economic but all relations; it delivers the paradigmatic infrastructure for making the social, affective and material relations we call our world – an increasingly volatile cohesion in which the promise of welfare for all is replaced by the exploitation of individualized affects. In a world in which ‘states’ (from corporate bodies to national states; from social status and individual identity to probabilistic states of the world) shift from (theoretically) autonomous devices within specific systems of relations to speculative ventures exposed to contingency, the ability to leverage one’s bets at high factor, dynamically hedge exposure any time and externalise losses in no time becomes the unifying – if not universal – method of governance in managing claims repetitively against one another. As this condition includes all data traded in complex interrelations, the market regime – both embodying and exceeding the neoliberal framework – escalates the derivative paradigm to social media, politics and the contingent becoming of subjectivity. This point refers not only to the prognostic role of finance in the economic realm. Rather, the way people-as-data are treated is based on a derivative paradigm. This case is often neglected, as debates about the contours of our technocapitalist era are often narrowed down to a “dataism” that Evgeny Morozov exposes in his review of Shoshana Zuboff’s Surveillance Capitalism: “Google and Facebook were restructuring the world, not just solving its problems” (The Baffler, 4/2/19). 

One fact largely ignored in this context is that derivatives are metadata par excellence. Long before data-driven platforms like Google and Facebook appeared on the world stage of proprietary digitization, the introduction of scientifically endorsed derivative models, contracts, and algorithms (that make derivatives large scale operational) prompted ever-increasing waves of data exploitation. This rise not only constitutes the main source of what was later dubbed Big Data; in fact, derivatives performatively pre-structure the modes of how capitalism exploits the unknown (future) and volatility (risk). Hence, instead of referring to these disruptive platforms as ‘Big Tech’, we should understand them as quantitative Hedge Funds that speculatively capture, capitalize, produce, and govern (future) individual behavior and social patterns at any (micro) moment. 

The derivative paradigm is not just the model for how data are made productive – in other words, how the future is made productive. The Derivative Condition argues that by the power this logic holds over the most elusive (and illusory) of human ambitions – foreknowledge of the future – the contingent claim has also initiated a turn from representative to performative speech in the way power communicates today. In our volatile world, black box technowledge forms the framework of algorithmic governance, and thus the asymmetric regimes that capitalize on the performative evaluation, prediction, surveillance and enforcement of social automation, adaptation, and control. (Technowledge is a term I coined for bot-coded and automated acquisition of knowledge. An example would be Google’s PageRank algorithm: by exploiting data for profit – a main feature of technocapitalism – it revolutionized online search and leveraged Google’s market share.) 

By escalating volatility and leveraging information and access asymmetry, platform capitalism (digital service providers with monopolistic data-power that privatizes governance) and Twitter politics demonstrate sophisticated but at the same time sociopathic symptoms of the derivative condition. Noise becomes the master of information when volatility is applied radically against probability – i.e. when contingent claims replaces the framework of generalized truth. A prominent example is the arena of alt-right politics populated by hedge fund owners (like Mercer), data brokers (e.g. Cambridge Analytica) media interest groups (e.g. Breitbart), troll factories (e.g. from Russian) and politicians (like Farage). Donald Trump, for instance, redesigns Twitter as Dark Pool in which the escalation of noise – that is, the production of volatility – turns into competitive advantage. He escalates unexpected microevents by ‘surfing the volatility wave’ outside the realm of the probable; in other words, he attacks and subverts truth as a function of probability. Black Swans events – commonly deemed extremely rare – are now manufactured at electronic speed, leveraged by fake news and other malignant information asymmetries. Within a performative speech of power, the production of volatility and the recalibration of leveraged claims becomes paradigmatic for automation-based success; but this also amplifies authoritarian symptoms. 

While traditional methods of prediction (such as weather forecasting) were concerned with accurate accounts of a situation that cannot be changed, contemporary forecasting provides complex tools to intervene in real-time to affect future states in the present (as in climate modeling or Twitter politics). In this sense, a new temporality is ushered in. While the former derive from a probabilistic concept of representation, the latter indicate the turn to a performative regime of governance that strives to leverage contingency and the volatile indeterminacy in which the future emerges. Therefore, its range is not the long-term, but the constantly re-calibrated short term. The state of emergency, inherent in the word crisis, has become the platform on which reality is produced. 

Algorithms are not only written, automated and manipulated but owned and exploited. Hence, a question at the core of technocapitalist crises concerns what I call the biopower of the leverage class. The “derivative logic” (a term introduced by Randy Martin in his studies of financialization) has infiltrated social, legal, temporal and material relations to a degree that it is now the paradigmatic claim – the canon – of technopolitical governance. Due to this worldview, mimesis shifts from reproduction by imitation to (self-)production by recalibrated approximation (e.g. the quantified self, online echo chambers, social credit scores; the latter’s advanced state-driven implementation in China serves as model for Western right-wing politics).

However, epistemic inquiry and aesthetic imagination rarely grasp the full scope of what the derivative has unleashed and what it exploits as a resource: wealth and power derived from volatility (risk) and leverage (debt). Many studies of debt are blind to leverage as a potent form of credit, and thus neglect leverage as that other face of debt which takes advantage of volatility. But leverage and volatility are crucial to conceptualize how (bio)power operates between state and private interest. A point in case can be made as regards the technocapitalist class system. In a nutshell, I argue for a formulation of a property and power regime based on social asset classes in which a leverage class dominates tiers of debt classes. The proprietary upper class performatively secures, or shifts between, future potentials by recalibrating leveraged debt; and in case of systemic default, it externalizes toxic assets by socializing them to the debt classes (e.g. by bailouts, public debt inflation, austerity politics). This regime change has as yet not been acknowledged, partly because the performative turn of the speech of power and its non-linear, derivative regime is still relatively unexplored; but also, because at times even highly critical studies get distracted by neoliberal narratives – deeply entrenched myths that we need to debunk and resolve. Hence, there is urgency for a radical analysis of volatility and leverage as tools appropriated by technocapitalist governance.


But there is another angle, an antithesis that reads the derivative against the grain to unearth other forms of thinking and making in the derivative condition. What I’d like to call Poietics of Resolution engages with the question how the derivative, volatility and leverage can be reconceived as means to act against the pre-emptive embrace of data-driven exploitation and right-wing escalation politics. How can the notion of the derivative be accessed to give way to other meanings? How can we leverage its abundance as care for another sensibility? Here, I refer to a point made by Martin on the “derivative logic”: due to its pivotal position, the derivative can be recast to harvest collective forms of wealth formation and distribution. If we agree (or at least are open to the thought) that the “technology of the future” is a techne in its own right and as such not fully owned by capitalism, we can learn the art of reorienting the derivative and resolve which other ways it may gift for other forms of worlding. 

In this respect, I conceive of resolution, rather than transparency, as a conceptual tool for other (political, cultural, economic, ecological) sensibilities and relations. It applies the term’s semiotic assemblage – ranging from perception, visualization, and cognition to knowledge-production, problem-solving and decision-making – as a template for ecologies of solidarity against the violent asymmetries of non-transparency. And as each meaning of the term resolution includes a host of practices, knowledges and techniques, it offers genuine forms of agency in contrast to the rather passive concept of transparency. 

Such resolution does not come without risk. Hence, its ‘agents’, for whom I use the term renegades, engage in radical initiatives full of ambivalence and vulnerability (you can think of a renegade as an insider whistleblower who breaks loyalty to her black box system, an expert witness who denounces systemic beliefs or hackers who seek new and collective forms of engagement and empowerment, amongst others). But while the ‘system’ damns and stigmatizes the renegade as a traitor (because she shares what would otherwise remain hidden), her counterperformance turns her into an educator, the indispensable complicit with the externalized, disqualified, not unaccounted for: those who once represented the demos, the general public. She corrupts, sometimes unknowingly, a purity (im)proved from manufactured scarcity. Such a ‘downrising’ – a marginal, ambivalent and precarious act but more promising than an uprising cry for transparency – destabilizes the technocapitalist discretion hegemony. Even though it might often start from the perspective of critique and improvement, the renegarde act constitutes resistance taken to the level of insurrection.

I should add that I do not treat resolution as consensus in terms of probability – in other words, as risk management. Instead, resolution point to engaging with the impossible – to risks experienced and lived (in Donna Haraway’s diction, by “staying with the trouble”). The renegade is exposed to sheer limitless consequences – impossible personal risks – but her act of civil courage makes resolution possible. Disengaging with the capitalist infrastructure, which renders critique ineffective by exploiting or externalizing it, she enters the realm of revolutionary negation. The renegade is a figure that exceeds conventional frameworks of critique and agency for alliances that resist the false purity and determinacy of the technocapitalist doctrine. Hence, renegade activism is a call for emancipation in the form of insurrection. Such renegade activism might seem at the margin of technocapitalism, but it is in fact right at its core; it is the insurrection that unlocks the black box. Leveraged by solidary alliances it can even bear the potential to access wealth pre-empted by the capital-state nexus, finance conglomerates and data platforms and transform the acquiescent conditions of social automation and (digitized) labour. 

Therefore, the derivative condition offers a twofold tale: On the one hand, it engages in a postdisciplinary critique of the derivative and its data-driven situatedness – its main components-as-resource (volatility and leverage); its mode of circulation (hedging, speculation, arbitrage); and its performative exploitation (dynamic hedging, recalibrated evaluation). On the other hand, it expands on a postdisciplinary research based on various perspectives and findings – including the gift as a derivative ecology – to explore how artistic, cultural and socio-political practices can resolve the derivative from capital accumulation towards a techne of care devoted to the myriad potentials emerging in the complex, volatile and contingent entanglements we call our societies. As Vilém Flusser once noted: “Technology, to be overcome, needs to be transformed into something else.” 

Finally, technocapitalist escalation is about to eclipse itself. The incessant game of harnessing volatility for modes of asymmetric power also causes an escalation of crises. In the financial world – the ‘place’ where capitalism remodels itself via future risk potentials and their recalibration options – a hitherto heretical thought has gained traction: there is a price on full market capitulation. And as hedge funds are increasingly appearing that bet on the end of their business model, a.k.a. capitalism, we should happily accept their invitation. And therefore, engage the urgency to grasp what the notion of the derivative offers for redistributing wealth and resources to populations in all their diversity instead of a tiny elite; and to conceive of it as a technowledge for cultivating care in economic as well as socio-cultural terms. How can we to reorient the derivative as a techné for sharing risks and desires together in multiple forms for varied needs? To this end, The Derivative Condition aims to furnish access to a technowledge that is still quite obscure and strikingly uncharted relative to its impact on the world we inhabit. 

History of Derivatives Timeline: https://crap.sdbs.cz/las/#190,99,1z

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