Game of Claims: On Speculative Finance and the Social Logic of Leverage

Martijn Konings in conversation with Erik Bordeleau and Laura Lotti

Erik Bordeleau: Thanks Martijn for accepting our invitation, and thanks to Weird Economies for creating the conditions for this interview. Laura and I have been actively involved for the last few years in the crypto space, exploring the many affordances of blockchain-based cryptoeconomics. Your work has been an important, and dare I say, emboldening reference for us as we are both very much interested in the speculative dimension of finance, and how this speculative dimension intersects with the art world, that is, with art as speculative practice, something that is at the core of Weird Economies’ endeavour.

So as a starter, could you tell us a bit more about your trajectory as a researcher, and how you ended up focusing on finance and its speculative relation to value?

Martijn Konings: Thanks so much for having me! I’m looking forward to this conversation. The study of finance has been a long-standing preoccupation for me. One way of retracing how I got into it is by going back to my PhD days, where I first picked up this particular interest. I recently had the opportunity to reflect on this topic as I was asked to contribute a piece to a memorial issue for my late supervisor, Leo Panitch, who passed away sadly last year, as a consequence of Covid. That gave me the opportunity to think a little bit about what I have been doing over the past almost 20 years.

I did my PhD at York university (Toronto, Canada), which had a quite radical Marxist political economy department. There were a lot of people extremely interested in Marxist value theory and especially what I would describe as its scientist promise, the idea that you can really figure out once and for all what real value is. The key question in this context was always how value relates to labor. We know that this is not a linear relationship, and so a lot of work in this area tries to establish the mediations – what is the formula by which you can figure out how Labor produces value, how does this translation work?

I was very interested in this topic, but I also felt that the framing of it all was old, orthodox and problematic. It didn’t take on board other stuff I was interested in, like the whole post-structuralist shift, perhaps better termed post-foundationalism especially when it comes to value theory.

So I ended up working on the politics of American Finance. Leo had this big project on the American empire and all its different modalities and aspects, including the role of finance. That appealed to me because it kept me in touch with questions of value without having to deal with those problematics that I didn’t find so interesting. That said, this question – how do you think about value if there’s no obvious way to ground it, if there’s no anchor anywhere – always stayed on my mind.

After completing my thesis, I moved to Holland for a couple of years, and then to the University of Sydney where I ended up working with people like Dick Bryan and Melinda Cooper and, more recently, Lisa Adkins and some other people as well, and that was a really interesting environment to think about notions of value differently. Schematically, you could say that these were all people who thought that the theoretical insight of post-structuralism shouldn’t be just the occasion for a retreat from economic questions, but instead it should prompt us to think about value in a completely new way.

So that’s when I really started to go back to questions of value-form theory, trying to figure out what can you actually still say about value if there’s something that is inherently undecided or speculative or non-foundational about it. Taking value seriously means that you can’t be content with saying that there are free-floating signifiers and leaving it at that. I tried to work on that a little bit for my book on the emotional logic of capitalism, thinking about the way subjectivities value stuff and relationships and asking how this engenders a dynamic that gives capitalism an organic or endogenous coherence.

And then in Capital and Time, I took the bull by the horns and tried to find out how this works more precisely, and that’s when I settled on this idea of the temporal structure of value. If value is speculative, then it’s actually inherently impossible to decide beforehand what value will consist of. You can still say a lot of things about what those dynamics are, but it does involve a shift to a new register of thinking.

EB: It’s refreshing to hear how you went on questioning the marxist orthodoxy – I can’t say how many times we got stuck discussing the “exchange vs use value” conundrum. It is important to approach value formation away from all the presuppositions about work as the only “real thing” standing. What is the role of games and play in contemporary value formation, for instance? And it’s also a pleasure to hear about your collaboration with Dick Bryan. We got to work intensively with him a few years ago, as part of a collective endeavour to rethink value and reclaim the power of derivative finance from an activist perspective.

Let’s dig a bit deeper into the way you problematize the speculative aspect of value formation and the pragmatics of evaluation you foreground in your work. We particularly appreciate how you characterize the role of anticipation and expectation in value formation, and how value capturing is always entangled with an active process of prospecting for potentialities. There is this passage in your work that I like to quote, something like how “profit needs to be imagined before it can be reaped”. Could you tell us a bit more about how you envisage this idea of prospecting for potentialities inherent to capital formation?

MK: Thanks, that’s a really interesting way of framing my approach. So happy to think a little bit more about that. It’s not as if economists or political economists or economic sociologists do not deal with the issue of uncertainty. it’s been just such a prominent feature of economic life that there’s no way around it, but the problem is that it often doesn’t result in deep re-readings of this notion of value.

So when you look at some of the authors that have really influenced our reading of neoliberalism, they tend to think of it as a reversal of Keynesianism. I always talk a lot about Polanyi because he seems to me such an emblematic manifestation of the conceptual structure with which progressives and liberals look at the world and see these movements of dis-embedding and re-embedding. What binds these approaches is that, even as they see and acknowledge the role of uncertainty and speculation, they retain a deep commitment to the idea that there is a world of real value that needs to be represented in the right way. They tend to rely on a conservative notion of what symbolization and representation are about, and that sustains this dichotomy between real value and fictitious value.

So according to that perspective, there is real value and then there are irrational manifestations of value: symbols that are speculative, that do not simply passively represent something real, but that make their own claim on the future. The latter are seen as irrational, in the sense that they go beyond themselves. And in Capital and Time, I point out that this is actually a premodern critique: it would literally have been recognizable to the medieval church.

EB: The time of the future belongs to God…

In The Emotional Logic of Capitalism for instance, I use the notion of leverage as a way to understand how power works through certain subjectivities insinuating themselves into the reproduction of other subjectivities…

EB: …you characterize it in a very lively way. When you describe the logic of leverage in Capital and Time we feel like we are all actors in a proto-financialized field. When we make a claim, when we constitute ourselves as attractors in the social field, and sometimes happily discover new Schelling points… And that’s something that from the experimental side, working in the blockchain field, the whole idea of generating and articulating incentives for our own collective becoming, for our belonging-in-becoming, is a very interesting one, the self-propelling capacity that these claims have. You characterize really well these forces that are both social and financial at the same time…

Going back to neoliberalism, what to me really stands out about neoliberalism is that it is highly speculative. The question is why are we so responsive to its provocations, why do we constantly offer up our work and our energy and our subjectivity and our feelings and whatever else to this machinic thing. And that has everything to do with how we have been leveraged into that situation in both psychological and material ways. Especially the book Derivatives and the Wealth of Societies…

EB: Derivatives and the Wealth of Societies is THE book that I read entering into this field… Randy Martin, who is co-editor of this book, has been a major influence, especially how he conceives the role of knowledge in what he calls the social logic of the derivative…

MK: I think Randy Martin showed very concretely how it’s not just about the derivative as such – it becomes a template for reading sociality and embodiment and lots of other things in a way that I could not possibly do justice to right now. But I like to think that what he does there has something to do with leverage. It’s not just about the investment strategy you adopt: it’s about the wider field in which you position yourself and try to make sure that when the chips are down, you are going to be okay.

LL: Following on from this point, you may have followed recent developments in markets during the Covid period – like the rise of Robin Hood and other social trading apps, and groups like the WallStreetBets Redditors, manipulating markets and orchestrating large-scale financial operations (e.g. GameStop) through the sheer power of memes. We were wondering what are your thoughts on this social shift that finance has taken through technology? And how is this changing or accelerating (or perhaps subverting) the logic of leverage that you were discussing, as ways to make oneself known or become an attractor for other people’s investments and speculative claims?

MK: Interesting. A lot of issues rolled into one question, so I’ll try my best to wrap my head around it a little bit. I think there are a lot of people interested in these developments who see them almost as a shift away from capital or neoliberalism. And so right now we’re seeing this proliferation of ideas of neo-feudalism, which make the argument that neoliberalism has ended and we are going for something more dystopian. Mckenzie Wark has this book, Capital is Dead. Is this something worse? I appreciate the sentiment, but I don’t think we’re moving away from core logics of capital. So I am very interested in thinking about all these weird intersections of capital with social media and logistics and platform economies, but I feel it’s very important to think them in terms of how the core logics of capitalism work themselves out. And I think that leverage there is a very good term to use – Amazon has us on the hook, and that works through leverage. They are far more important to us than we are to them. There is such an asymmetry. If you’ve got five days to order something, then you can seek out a local bookstore. But if you really need something tomorrow you’re out of options. And I think that is the key, they have the speed, the time of things.

And again, that’s a bit more of a macro-level example. But the kinds of things that you just talked about, like the Robin Hood events and those kinds of things, I do think they illustrate very well how this logic is insinuating itself into the most micro-level social relations. And I think people are starting to pick up on that. The work of Brian Massumi is really about the modulations in and of the social that emerge when these kinds of strategies develop. Basically, I always think of these as attempts to theorize in a more precise way Deleuze’s idea of a control society. Christian Borch just has a new book out about algorithms and machine learning and how it reformats the nature of the social that speaks to these points as well.

Capital seems to have such a hold on the future. There’s all this work right now about how the future has been stolen, or again about the cancellation of the future. Temperamentally I’m like yeah, this is probably right; but that’s also a hard way to live, to really feel that there’s just no going anywhere. And so when you start to look for openings, then the kind of energized theorizing that we were just talking about is quite encouraging. So for instance, Dick Bryan right now is actively involved with designing new kinds of blockchain-based currencies that work in fundamentally different ways – I couldn’t explain it very well but the idea is to rebuild social justice and environmental concerns into the algorithm itself. It’s very intriguing.

EB: It’s all predicated on the promises that a blockchain-based decentralized finance could open up a new logic of community-based asset formation. Communities, or rather squads, as Laura and “Other Internet” have recently theorized them, that can configure their claims into the future in different ways. It’s a politics that is relatively left aside if I speak from a leftist perspective, where there’s kind of a taboo on what asset formation is about and that’s one of the reasons why we’re so interested in the question of leverage and also the social logic of the derivative, Randy Martin style, because you can’t just leave the future to people who make claims that are ultimately so anti-social and destructive, like capital as we know it.

So yeah, basically I don’t know how familiar you are with this whole blockchain-based decentralized finance world, but we were curious to hear your thoughts about that because we’re deeply committed to that experimental side of things – we are, for instance, both part of a project called The Sphere that aims at creating such economic space for the performing arts.

Erik: At best, blockchain is about empowering collectives and developing cooperation structures and other forms of collective investments leading to more sustainable value generation processes. In Blockchain lingo, DAOs and the whole DeFi ecosystem aim to facilitate new modes of decentralized, autonomous coordination at scale. That’s one of the lines of thought and concrete experiment we’re pursuing and that’s also where what Laura was saying about the power of the memes comes into motion.

LL: Yeah in that sense I think it is very much a way, as you were saying before, to create new modes of leverage that are not just about replicating the same forms. I could also read some of the episodes that we’ve seen with WallStreetBets and GameStop as consequences of rendering more accessible the current logic of leverage of banks. But I do see that in the blockchain field what constitutes the “value” that backs tokens, and the speculative claims attached to them, is something that is a lot more malleable and a lot more heterogeneous.

EB: It brings me to a question that Laura and I had during this whole GameStop thing, back in the winter. We were reading Peter Thiel, who was suggesting that somehow the bubbles that we’re in right now are made of a different substance and they might not be exploding in the same way as one would normally expect. He was pointing at another affective logic, perhaps simply a new type of addiction, especially during this crazy time of Covid: bored people gambling massively online on different assets, online communities forming digital tribes of radically new kinds, perhaps creating or participating in new asset formations… I was wondering what you think about that, without asking you for any financial advice here obviously!

MK: That’s interesting. You know, Peter Thiel says a lot of things, but this particular thing strikes me as a good observation in the sense that he has a point that a lot of these are not just bubbles. You will always have local bubbles that really make no sense, you can spot those easily because usually people are speculating on a thing and everybody’s trying to find a way to get out before the market drops.

But what I think he puts his finger on correctly, is that there are a lot of bubbles that have a community or constituency associated with them, a constituency of people who are committed, consciously or otherwise, effectively or otherwise, to the validation of the bubble, to sustaining it into the future.

This relates to some of the research that I’m doing on the housing market in Sydney. I’ve been living there since 2009 and property prices have been going up by 10% or so a year. People with regular jobs can’t buy a house anymore unless you’ve got wealthy parents. Commentators like Steve Keen see this as just debt that is out of control and that bears no actual relation to the value of the things – so the bubble will have to pop at some point (what goes up must come down).

People have been making these predictions for decades now. And yet it’s just not happening. There’s no magic there, it’s just that there is a middle class constituency that has a vested interest in this market, and while there are any number of things that politicians and regulators could do to actually pop the bubble if they wanted to, they realize they can’t. And so it’s not really a market in the way we tend to think of it – it is a highly speculative market that is embedded in a number of policies and cultural values and norms that ensure that even if the market doesn’t go up, it at least doesn’t go down. And you see this constantly: two years ago, at the start of the Covid crisis, it looked like there might be a downward correction, but then it kind of plateaued and now it’s just going up again.

So I think there’s something to that. I’m not sure if this is a great connection but I’m very interested in Peter Sloterdijk’s work on bubbles, and all the variations on the bubble-theme that he has generated. Some of that is very fanciful, but it does get at the point. He’s trying to re-read history with an appreciation for the reality of the bubble in a way that I’m not sure it would have been possible to do before living through the neoliberal era, and feeling that perhaps everything is a bubble in a sense.

EB: Martijn, just full disclosure, I just co-edited a book on Peter Sloterdijk, and the article I wrote for this volume is about aphrogenetics (from aphros, foam) and what he defines as upward movements, i.e. the type of aspirations and con-spirations that animate the “spheres” or affective bubbles we generate for ourselves. I’m most interested in exploring further the bubble-esque aspects and worlding effects of speculative finance.

MK: I’d love to read that chapter as well. Sloterdijk is a performer, he likes to be controversial, but I think there is a core to his philosophy that is really important to explore. He tries to bring his ideas back to boring Heideggerian explorations of all these artifacts, but I think the interesting thrust is elsewhere….

EB: …He takes very seriously the question of social effervescence. Effervescence as a key aerial component that suggests another ontology for finance.

LL: You’ve shared so much with us already, but maybe as a closing remark: what would you recommend to us to make our economies weird and weirder?

MK: How can we make our economies weirder? Okay, there are a few things that come to my mind. First of all, I’m not really the best person to ask, because I think there are a lot of people out there doing a far better job at weirding things. But let me go back a little bit and say how people tend to formulate a critique of capital that is really hard to distinguish from a pre-modern critique of capital: capital is excessive, limitless, it does not respect boundaries, it claims the time that’s only god’s to give. And that’s where the concern about speculation is really rooted. And weirdly enough, I find that people who are very happy to criticize orthodox Marxism for its economism and think they’ve left all that behind, also, when push comes to shove, tend to return to that template of critique. In Capital and Time I’ve got this quote by Latour, where he basically sounds like an Orthodox Marxist. This is from –what is his latest magnum opus called again?

EB: Inquiry into Modes of Existence?

MK: Yeah, I think it’s from that, so he says: “By identifying technological innovations (TEC), the splendors of works of art (FIC), the objectivity of the sciences (REF), political autonomy (POL), respect for legal linkages (LAW), the appeal of the living God (REL), [the Moderns] would have glowed in the world like one of the most beautiful, most durable, most fruitful civilizations of all. Proud of themselves, they would have had no burden weighing them down, crushing them like Atlas, like Sisyphus, like Prometheus, all those tragic giants. But they went on to invent something else: the continent of The Economy.” And somewhere else he says that the economy is “an infinite and boundless domain totally indifferent to terrestrial existence and the very notion of limits, and entirely self-centered and self-governed.”

And so after a career of turning upside down received understandings in various fields, this is the theory of capital he comes up with. It’s so unsophisticated. Not that I care so much about Latour in particular, but it just means that he has found no register for dealing with capital in a way that would match the sophistication and insight of his other work. This template of the critique of capital is just very stubborn. We are still stuck in a pre-modern critique of capital, and perhaps we should start thinking about what would a modern, committedly secular, critique of capital look like.

And, of course, I can already anticipate the response, as modernity itself is also kind of discredited. But we’re skipping a step here: before we move past modernity, we should probably know what a properly modern critique of capital would even look like. Even if we then also want to move beyond that, that to me would be interesting. But I don’t think we can try to leave the project of modernity behind as long as our critique of capital is still something that would have been approvingly recognized by the medieval church. This relates to Latour’s notion that we have never been modern. He thinks we should just embrace that, but I think we should probably see it as a problem. We should actually find a truly secular point of view from which to think about capital, because I don’t think we have it at the moment.

When I think about authors who I think share that affinity, my mind goes to Luhmann. He was just so obsessed with seeing paradoxes everywhere, he was just so addicted to weirding. And that can be a bit irritating in its own right. Because you got dozens of 500 page books that you feel never really come together. But still, I love Luhmann just for his ability to make weird, paradoxical expressions productive. He brings you back to the blind spot that you have, and that expresses itself as that paradox.

The truly secular way of criticizing capital would be about our own blind spots, our own implications. It’s not about criticizing something that is external to us: it’s about why do we keep doing this, why do we keep offering up our surplus.

Recently I discovered a book by Kiarina Kordela, it’s called $urplus. She basically develops a very Spinozian critique of exploitation and surplus, and I think it has a lot of mileage. In the end the question is really why we are affectively incorporated into this dynamic. Why are we always responsive? Why do we keep clicking? It’s hard to think about such questions without foregrounding the psychological dimension. So yeah, as I said, I’m not sure this is a great recipe for weirding, but this is where my thoughts would mostly go.

LL: It’s really wonderful. Thank you, I also became interested in Luhmann recently. Luhmann would appreciate precisely what you’re talking about.

MK: Yeah Luhmann draws you in, once you start reading, it just keeps going, but it also never resolves itself.

EB: Martijn, this has been a blast, thank you so much.

MK: Thank you, I really enjoyed this conversation, it was a lot of fun.

This post was first published on Weird Economies. The set image is Wall Street bubbles – Always the same (1901) with American financier J. P. Morgan depicted as a bull, blowing soap bubbles for eager investors.