Capitalization

A Cultural Guide

Collectif CSI

DOI: 10.4000/books.pressesmines.3463

Publisher: Presses des Mines

Year of publication: 2017

Published on OpenEdition Books: 28 August 2017

Serie: Sciences sociales

Electronic ISBN: 9782356714824

http://books.openedition.org

Printed version

ISBN: 9782356714220

Number of pages: 168

Electronic reference

COLLECTIF CSI. Capitalization: A Cultural Guide. New edition [online]. Paris: Presses des Mines, 2017 (generated 30 mars 2021). Available on the Internet: <http://books.openedition.org/pressesmines/3463>. ISBN: 9782356714824. DOI: https://doi.org/10.4000/books.pressesmines.3463.

This text was automatically generated on 30 March 2021.

© Presses des Mines, 2017

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What does it mean to turn something into capital? What does considering things as assets entail? What does the prevalence of an investor’s viewpoint require? What is this culture of valuation that asks that we capitalize on everything? How can we make sense of the traits, necessities and upshots of this pervasive cultural condition?This book takes the reader to an ethnographic stroll down the trail of capitalization. Start-up companies, research centers, consulting firms, state enterprises, investment banks, public administrations: the territory can certainly prove strange and disorienting at first sight, with its blurred boundaries between private appropriation and public interest, economic sanity and moral breakdown, the literal and the metaphorical, the practical and the ideological. The traveler certainly requires a resolutely pragmatist attitude, and a taste for the meanders of signification. But in all the sites in which we set foot in this inquiry we recognize a recurring semiotic complex: a scenario of valuation in which things signify by virtue of their capacity to become assets in the eye of an imagined investor.A ground-breaking anthropological investigation on the culture of contemporary capitalism, this work directs attention to the largely unexplored problem of capitalization and offers a critical resource for current debates on neoliberalism and financialization.

Collectif CSI

Fabian Muniesa, Liliana Doganova, Horacio Ortiz, Álvaro Pina-Stranger, Florence Paterson, Alaric Bourgoin, Véra Ehrenstein, Pierre-André Juven, David Pontille, Başak Saraç-Lesavre and Guillaume Yon.

Table of contents

Preamble

A Few Lineaments

A rudimentary understanding of capitalization

A pragmatist angle

A cultural view

A particular trail

Entrepreneur Meets Investor

The value disappointment

Milestones of security

A performative configuration

How to Think about Discounted Value

The problem of forestry valuation

Discount caught in the trees

The Entrepreneurial Project

Entrepreneurship and the paperwork of carbon offsetting

The vocabulary of investment

A Scenario for Cleavage and Altercation

The story of technology transfer

Adapting the script

The scenario in the negotiation process

A hospitable environment for the scenario

Ownership, investment power and the imperative of liquidity

The subject of investment

The limits of the scenario

Business Modeled with Purpose

A sequence of problems, benefits, and profits

Valuation through relation

The tricks of adherence

A capitalization space

Capitalizing on Forms

The technologies of opportunity

Forms as capital

Scientific Research as Asset Management

A portfolio of scientific contributors

Securing scientific return

Research finance

Assumptions of the Discount Rate

In the manuals of financial analysis

The free investor

Efficient markets

The state

A patchwork gaze by way of political philosophy

In the hands of the financial analyst

Governing the Public Utility

Establishing criteria for the management of expenditures

The discount rate as a political lever

Capitalization as a state engine

A Hospital Bed

Introducing the fine-grained cost

Introducing the financial situation

The consequences of an investment concern

The Time Machine

Searching for an assessment of the future

Encapsulating the needs of future generations into a fee

A problem with the time capsule, and a solution

How to build society

Jumping to Conclusions

A wide surface to cover

Becoming asset, becoming investment

Gaze and scenario

A problematic thing

A rendezvous

Bibliographic References

Preamble

This book originated in the basement of the École des Mines de Paris, in the seminar room in which gatherings for the Centre de Sociologie de l’Innovation are typically held—and known to a few as the birthplace of actor-network theory. On October 18, 2011, participants in a research workshop were trying to come to terms with a strange assignment: “Describe an act of capitalization (one page).” Why such an odd task? The purpose was laudable. In a world cluttered with incantations on capital, capitalists and capitalism, it was quite a refreshing idea to test the old house recipe of turning things into processes, nouns into verbs, capital and its “isms” into an act. But the result was deplorable. Participants left the seminar frustrated, if not clueless and disoriented, with the impression of having missed something important—both the fragile specificity of an act of capitalization (what it is, exactly) and its significance for understanding what is happening (what it does to the world). This book is the result of a collective attempt to reconcile these feelings.

Fabian Muniesa had previously started to put together a few ideas with the broad aim of exploring the performative meanders of the world of business, which had opportunely translated into research funding from the European Research Council in early 2011 (Starting Grant no. 263529). Liliana Doganova, Horacio Ortiz, Álvaro Pina-Stranger and Florence Paterson joined the project, and the team quickly stumbled upon the problem that is formulated in this book. The circle then expanded to include Alaric Bourgoin, Véra Ehrenstein, Pierre-André Juven, David Pontille, Başak Saraç-Lesavre and Guillaume Yon, who had encountered different variations of the problem of capitalization in their respective investigations. The authorial collective is now disbanding as a result of the vagaries of professional life (some are no longer at the Centre de Sociologie de l’Innovation), but with the idea that the insights gained from this joint venture should now be unleashed in separate directions, multiple versions and contrasting uses, a network of intertwined references, critiques and capitalizations.

Our list of acknowledgements is quite long. It includes, first and foremost, fellow researchers at the Centre de Sociologie de l’Innovation who were ensnared into this conversation at some point or another: Madeleine Akrich, Michel Callon, Antoine Hennion, Brice Laurent, Alexandre Mallard, Cécile Méadel and Vololona Rabeharisoa. Doctoral students and postdoctoral fellows did also provide feedback and inspiration: Marie Alauzen, Mathieu Baudrin, Alexandre Camus, Clément Combes, Quentin Dufour, Ksenia Ermoshina, Pierre Gueydier, Julien Merlin, Francesca Musiani, Trine Pallesen, Jean-Baptiste Pons, Laurence Tessier, Martín Tironi, Thomas Vangeebergen, Alexandre Violle and Kathleen Zoonnekindt. Parts of this project also were discussed, privately or publicly, with numerous colleagues who contributed their advice and support: Ivan Ascher, Kristin Asdal, Jens Beckert, Christian Bessy, Kean Birch, Luc Boltanski, Alice Bryer, Laure Cabantous, Ève Chiapello, Kimberly Chong, Annie Cot, Barbara Czarniawska, Will Davies, Joe Deville, Emmanuel Didier, Marie-Laure Djelic, Ali Douai, Arnaud Esquerre, Patricia Falguières, Michel Feher, Thomas Ferguson, Marion Fourcade, Pierre François, Daniel Fridman, Martin Giraudeau, Keith Hart, Penny Harvey, Claes-Fredrik Helgesson, Isabelle Huault, Sheila Jasanoff, Sarah Kaplan, Jeanne Lazarus, Adam Leaver, Élisabeth Lebovici, Marc Lenglet, Vincent-Antonin Lépinay, Andrew Leyshon, Javier Lezaun, Roni Mann, Giuseppe Mastruzzo, Bill Maurer, Afshin Mehrpouya, Renate Meyer, Peter Miller, Sabine Montagne, Daniel Neyland, Alexandra Ouroussoff, Paolo Quattrone, Kane Race, Ramón Ramos, José Santiago, Shao Jing, Michele Spanò, David Stark, Talha Syed, Nicholas Tapp, Signe Vikkelsø, Christian Walter, Frederick Wherry, Zhang Hui and Zhu Yujing. We finally need to thank the persons that helped with the editorial process and the practical organization of the venture: Silvia Dekorsy, Catherine Lucas, Sandra Rodrigues and Kara Stephenson Gehman.

What the following pages offer is certainly neither a research monograph nor a systematic theorization of the matter at hand. Our aim consists rather in formulating a problem and examining the terms in which it can be properly dealt with. The discussion draws from empirical vignettes that are grounded in a number of investigations. Chapter 3 is based on research carried out by Liliana Doganova on the history of financial valuation methodologies in the United States of America and Europe. The case study used in Chapter 4 is part of Véra Ehrenstein’s research on a carbon offsetting reforestation project in the Democratic Republic of the Congo, which included field observations and interviews with project participants in 2010 and 2011. Chapter 5 draws from an extensive study by Álvaro Pina-Stranger on biotechnology milieus in France, for which he used both qualitative and quantitative methodologies, including 125 face-to-face interviews conducted in 2008 with managers of biotechnology firms and 20 with managers of venture capital firms. The materials used in Chapter 6 come from Liliana Doganova’s research on the comparative sociology of technology business models developed between 2005 and 2015 and based on a series of case studies documented through interviews with entrepreneurs and investors and analysis of corporate material. The illustrations provided in Chapter 7 are based on the participatory ethnography carried out by Alaric Bourgoin in a management consulting firm in France from 2010 to 2013. Chapter 8 is informed by studies on scientific authorship and bibliometric policy conducted by David Pontille since the late 1990s, and which include an extensive literature review on authorship strategies. The insights communicated in Chapter 9 originate in anthropological research carried out by Horacio Ortiz, which comprised participant observation in brokerage and asset management companies in New York and Paris between 2002 and 2004, professional accreditation as a financial analyst and experience as a finance instructor in business schools in Paris and Shanghai from 2008 to 2015. Chapter 10 draws from Guillaume Yon’s archival research on the policy and economics of the French public electric utility in the 1950s and 1960s, carried out between 2011 and 2015. Chapter 11 is based on Pierre-André Juven’s sociology of the managerial and financial reforms of public hospitals in France in the 1990s and 2000s, which draws from interviews with managers, accountants, consultants and civil servants. The problems examined in Chapter 12 are illustrated with evidence gathered by Başak Saraç-Lesavre for her investigation of nuclear waste management policy in the United States, with interviews with relevant actors and archival analysis carried out between 2011 and 2015.

The book does not aim at providing an extensive synthesis of these various research endeavors. It rather seeks at distilling a particular problem or, in other words, at problematizing capitalization. Its pages are marked by a particular writing style, which corresponds to the authorial group’s response to that challenge. Problematizing capitalization is no easy task if one wants to fulfil at once the expectations of specialized scholarly scrutiny and the project of a more accessible form of sensitization. Problematizing something is certainly in part about defining, explaining, modeling and criticizing it. But only in part, because in order to keep the problem alive—ductile, strange and surprising, fully available for further thought—the professorial tone needs sometimes to provide some room for drift and wander. A travel guide strikes us as the right metaphor: it can of course be more or less authoritative, but fellow travelers are always reminded that the magic they get, they get it principally from the travel, not from the guide.

A Few Lineaments

“The orchard produces the apples;
but the value of the apples produces the value of the orchard.”

– Irving Fisher, The Rate of Interest, 1907, pp. 13-14

What does capitalization mean? Where is it and what does it do? How can we make sense of it? And why do we need to make sense of it at all? Answering these questions requires some preparation. In this chapter, we first present a preliminary characterization of capitalization: a pervasive form of valuation that propels a consideration of return on investment and shapes our world accordingly. We then clarify how we have chosen to cope with it: as a practical process, an operation that we tackle from a pragmatist angle. Finally, we identify a few possible sites in which this operation can be investigated.

A rudimentary understanding of capitalization

Although we do not posit a straightforward definition of capitalization, we certainly can provide a clear intuition of what it is about. Capitalization is a way of considering something—specifically its value—from a certain angle. In financial parlance, capitalization is about envisaging the value of something in the terms of an investment. Valuing something means assessing the expected future monetary return from investing in it. But the notion of capitalization is also part of ordinary vocabulary and easily acquires meaning outside finance. Hence the wide angle of our interrogation: capitalization has certainly to do with finance proper, but it is also more than that.

Capitalizing on something can connote getting the most out of a previous undertaking, augmenting the benefits of action through the strategic use of a previous acquisition, or, simply put, maximizing advantage. One can, for example, capitalize on writing (using bits of an already published article for a book chapter) or on friendship (counting personal social ties as assets for social progress). The notion is indefectibly related, more or less literally, to the mundane idea of capital: money, or something comparable, that can be used to make more money, or something comparable. It is also related, perhaps more saliently, to the idea of discount: the value of something today depends on the value that can be derived from it in the future. Thus, the value today is deemed smaller than the value in the future (that is, it is discounted), because the future return is uncertain and investing today therefore requires taking a risk. In short, in order to capitalize on something, it must be either considered an asset, or turned into one. As a technique for prospective valuation, capitalization characterizes the reasoning of the banker, the financier and the entrepreneur, but can also be seen at work in situations beyond private profit. For example, capitalization methodologies can govern how governments plan actions in the public interest.

Capitalization is almost everywhere. Rules according to which credit is allocated and funding is provided today within society are based on mechanisms of financial valuation that revolve around this principle. All kinds of things—from scientific ventures to development projects, from industrial activities to cultural products, from lifeforms to lifestyles, from creative ideas to disaster protection plans—can be valued today in the light of what financial analysts, asset managers and capital budgeting specialists call the “cost of capital.” That is, by discounting expected incomes, one can estimate how worthwhile it is to finance these things in relation to the uncertainties surrounding their yields, which are calculated based on a so-called rate of interest. Indeed, all kinds of things can be affected and oriented by this valuation process. In some cases, things are created entirely for the purpose of capitalization. And these types of views, purposes and operations can also be recognized in the way we may handle things in what we quite clumsily refer as “ordinary life” (as if the capital investment template had not become ordinary enough). Thinking as an investor—that is, as one who supposedly understands what capitalization is and knows how to handle it—is not engaged in solely by properly trained businesspeople, but also by students, scientists, residents, shoppers, parents, lovers, patients, officials, employees, artists and indigents. We do not know, as of yet, if this is good or bad but we surely know that it is important. Capitalization can, of course, have many faces, sometimes carrying the traits of blatant opportunism and other times the features of rational allocation. But what is undeniable is that it deeply intervenes in the shaping of our world, and thus deserves critical attention.

Social researchers seek to understand and explain how things are valued, and how several forms of valuation affect the ways in which things are made, made sense of, and practiced. This is particularly true for anthropology and sociology, two areas of social research in which particular attention has been devoted, for example, to commercial valuation—things being valued as they are bought and sold, and hence valued as commodities in the market. It is striking (not to mention frustrating) to observe, however, how the immense continent of valuation which is capitalization has been neglected in anthropological and sociological research. As the development of markets has been often characterized by commentators as a crucial aspect of the spread of capitalism, the focus on commodification or marketization has been repeatedly used, wrongly in our view, as the crux of an analysis of capitalistic valuation. The result is that capitalization proper—a form of valuation that propels, in our opinion, a quite singular form of reality—has been overlooked as a social fact. Why is this so? Perhaps it has been too forcefully naturalized; it exists, but there is nothing wrong with it, or at least nothing that requires any particularly novel investigative undertaking. Or perhaps it has been replaced by a chimeric object, “Capital,” which can represent anything (e.g., power, money, matter, domination, freedom, evil, good, you name it).1

Our attempt at contributing to this inquiry is not—and could not be—an attempt to establish a model. What we provide here are just elements: elements that may foster further discussion and open avenues for research. If an inquiry into capitalization can be viewed as a collective journey, our project can be thought of as a travel guide. It is certainly incomplete, and its meanders rely on the preferences of the travelers who contributed. Although it highlights some sites that should not be missed (i.e., social milieus, empirical situations and historical moments, as well as crucial concepts), it does not do so in an exhaustive fashion, and also suggests some incidental excursions to sites that a busy (or more independent) traveler could very well skip. That said, the guide strongly advocates for an attentive attitude and recommends an itinerary for a fairly comprehensive appraisal of the continent of capitalization.

A pragmatist angle

Our journey has a starting point. This is that capitalization, considered as a particular form of valuation, is best understood as a process, a relationship, a social relation. Capital, we posit, is not a thing in itself—something that one has or has not—but rather a form of action, a method of control, an act of configuration, an operation. Hence our shift from the substantive form to the activity: we do not principally examine capital, capitalism or the capitalist, but operations of capitalization.

This perspective is, of course, not uniquely ours. Indeed, if we write that “capitalization, considered as a particular form of valuation, is best understood as a process, a relationship, a social relation,” it is difficult not to refer to Karl Marx and to his point that “capital is not a thing, but a social relation between persons, established by the instrumentality of things” (Marx and Engels 2010b: 743). According to Marx, the process of becoming capital—what we call capitalization—requires specific conditions that were limited, in his views, to the reality of wage labor in an industrial or a colonial society. Our objective is different: we focus predominantly on realities that were hardly part of Marx’s era. But we certainly draw on Marx’s relational intuition2.

In order to further refine our starting point, though, we need to extract that relational intuition from the wider philosophical context in which Marx developed it. The accumulation of money and the transformation of everything into monetary terms occupied the broader intellectual quest of Marx and his contemporaries, as it largely occupies contemporary concerns about the technicalities of financial investment. Yet, as many commentators have indicated, including Michel Foucault (1966), the characteristic epistemology of Karl Marx (and of Adam Smith, for that matter) still requires an understanding of valuation as a matter of match or mismatch between an object and its representation. A confrontation of labor force or its result in produced objects and services to their social valuations in the form of prices would reveal a mismatch from the perspective of Marx, if not a contradiction. From such a perspective, the prevalence of the problem of the adequateness or inadequateness of value, its truth or falsehood, is inescapable. And this is a problem that our inquiry sets out to avoid.

One important philosophical implication of our broad, pragmatist perspective is that we depart from the problem of false representation, a common problem encountered in the social critique of money, capitalism, and financial valuation alike. Indeed, this problem requires being attentive to the distinction between some kind of value that would be real and some other kind that would not be. We disregard this problem because we focus on valuation as an operation: an operation that is real as soon as it takes place, an operation that produces reality as soon as it has effects. This is, we believe, the crux of our pragmatist take. If there is something we would like to avoid (and to counter, if possible) is the scholarly discourse that claims that the valuation processes that constitute our contemporary global reality are virtual, in the sense of not real. This equates to saying that today’s world is not true. But the world is true. And, if we call capitalization virtual, it is in the sense of practical and consequential, not in the sense of unreal.

So our perspective, which is focused on valuation rather than on value, and bypasses the representational quandaries of value, openly embraces a pragmatist angle by acknowledging the constitutive power of valuation, its conditions and effects, and the reality it prompts. Our social inquiry into capitalization is partial to the performative turn that shifts from value to the social work of valuation (Muniesa 2014). Of course, calling something an action, considering it to be a process rather than a fully-formed object, and further calling that action social, often creates intellectual misunderstandings. So it is important that we clarify from the beginning, aligning our claim with some crucial pragmatist tenets, that talking about social work—not only of valuation and capitalization, but also of signification, abstraction, calculation, commodification, and financialization—does not mean focusing solely on what people think, but means also examining what people do and what happens to them, and also what happens in general to the world (not only to people). An entrepreneur doing what she needs to do in order to make her enterprise valuable in the eyes of a financier, or a potential investor trying to determine how valuable the enterprise may become are both performing this social work of valuation—social in the sense of collective, organized, meaningful and lived.

Here again, of course, we are not alone. A number of commentators on Marx’s intuition also have expressed discomfort with the epistemology Marx was drawing on, and have offered ways to rectify it through a philosophy of the performative institution. For example, relying to some extent on the insights developed by Cornelius Castoriadis (1975), Jonathan Nitzan and Shimshon Bichler (2009) said that capital is not about power, but is...