Although they went viral for the first time with the 2007 financial crisis, derivatives in their scientific-cybernetic manifestation have had a history of fundamental importance for about 50 years (2023 marks the 50^th anniversary of the Black-Scholes paper that introduced the most influential model of modern finance). Journalists and pundits picked up on the theme and devoted telecasts, articles, and books (some of which bestsellers) to the application of finance technologies. They focused on the evident malpractice and economic injustice that resulted from them 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, aiming at developing new approaches with open-source models, knowledge commons, distributed money systems, or citizen access.

Distributed crypto-economic experiments have been working more and more with non-directional and multi-dimensional frameworks, protocols, and applications. This infrastructure, which we could call “derivative surphase”, connects the contingent phase space of volatility with the socio-material planes where shared risk-taking performatively recalibrates, leverages, and distributes choices, values, and surpluses. These attempts go beyond directional approaches to blockchain technologies, as initiated by Satoshi Nakamoto’s Bitcoin white paper in 2008. In the following, I focus on what I conceive of the derivative condition because shedding light on the derivative seems to me still 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 (data-driven financial and platform capitalism).

The Derivative

Derivatives, in brief, are financial contracts without intrinsic value whose prices follow the financial asset they are derived from. An asset price moves up and down, which constitutes risk for investors. The first derivative, for instance, measures the volatility of these directly unforeseeable swings, i.e., their risks. Derivatives such as options, futures, or swaps, are therefore used to trade and manage risks, either by hedging (insuring against risk), speculating (expanding risk exposure) or increasing leverage (at a fraction of the cost of the underlying asset, they magnify the latter’s movement; cutting both ways, leverage increases reward and risk potential). In its contemporary money form, it is a quantitative measure, primarily but not exclusively based on stochastic calculus (such as Ito’s lemma), theoretical physics (Monte Carlo simulations) and biology (Brownian motion).

When I speak of the ‘derivative’ in the singular I refer to it as a conceptual term.* The derivative operates within the contingency of time. Its dynamic recalibration regime is ‘innately’ performative in that it acts on the future – it does not only anticipate, it claims the future, a fact reflected in an alternative professional term for an option, the ‘contingent claim’.

The Derivative Paradigm

Technopolitically, the derivative unleashes a cybernetic ‘oracle’ of production – contingent claims bring into circulation the promises of anticipated future outcomes and, as a consequence, govern what is produced. Capitalist production (the ‘real economy’) has therefore become a ‘derivative’ of financial circulation, which can be described as the production of (future) risk. 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). Volatility is recalibrated constantly to exploit risk (rather than merely avoiding it) because it allows navigating the ‘sea of contingency’ (the uncertain future). While mainstream economics maintains that financial markets are catalysts of future wealth (the promise of profit accumulation), economics subjects the notion of the promise to a quantitative archive whose (meta)data are power for the performative agency of derivative finance: to claim the future at present.

What surfaced with the 2007 crisis is the fact that the derivative had taken hold outside the arcane world of financial speculation. As a result, I argue, the future emerges today within a derivative paradigm (in the sense of a theoretical framework that alters practice fundamentally). Nowadays, the exploitation of algorithmic processes that leverage the dynamic recalibration of contingent claims is not only characteristic of finance. The derivative constitutes a central operation of algorithmic business and governance, an exploitation as obscure as it is immediate and profound.

While the derivative is a contractual entity, it exceeds the representative dimension of law: its performative mode has become the template for a technocapitalism in which the future turns from an uncertain and unknown horizon to a trajectory that acts on the present. But lack of attention to the ‘history of the future’ impedes critical reflection on finance and how it gained the power to shape the spaces of individual, social, and material relations. One reason for this could be that critical voices and studies get sometimes 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 interests.

In my work, I argue that the derivative, through the power yielded to financial markets by the capital-state complex, re-orients not only economic relations but effectively delivers the 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 claimed by the exploitation of individualized affects. ‘States’ (from corporate bodies to national states; from social status to probabilistic states of the world) shift from (theoretically) autonomous devices with specific systems of relations to speculative ventures exposed to contingency. The ability to leverage one’s bets at high factor, dynamically hedge exposure at any time, and externalise losses in no time becomes the unifying, if not universal, method of governance for 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 politics, social media, and the contingent becoming of subjectivity. 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).

Postdisciplinary Research Approach

To address and counter the articulations of technocapitalism, the concept ofthederivative condition focuses on the imaginative and explanatory potentials of artistic and activist research and intervention. In contrast to academic disciplines, which emphasize their study area over others, the project follows what I call a ‘postdisciplinary’ methodology. Operating with an activist approach within the non-disciplinary field of art, this methodology allows examining financial and other data-driven spheres along a multiplicity of disciplines and perspectives, including epistemic, aesthetic, ethnographic, technological, economic, and political ones.

The scope of this heterogeneous examination is not restricted to finance. Rather, it aims at elaborating market terms, models, processes, infrastructures, narratives, and fictions to critically engage with cultural, artistic, and socio-ecological materializations of the derivative. The question I pose – in collaboration with comrades and allies, as well as (renegade) partners who speak from inside the black box, is: What if we can develop derivative practices that effectively oppose the violence of the current condition? In this sense, I propose an affirmative approach based on a foundational critique instead of rejecting derivatives entirely as ‘financial weapons of mass destruction’ (Buffett). Firstly, the paradigmatic position of the derivative in technocapitalism needs to be better understood. And on this basis, the research aims to explore how the derivative can be recontextualized as a techné to redistribute wealth and resources from a tiny elite to populations in their diversity.

Technowledge

Hence, the project’s vision is to contribute to a reorientation of derivative ‘technowledge’ to empower collective and common activities. It aims at re-conceiving the derivative as a tool for cultivating sensibilities of sharing risks, needs and desires together, not only in economic but also socio-cultural terms.

‘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—this technology revolutionized online search and leveraged Google’s market share. Some quantify their truth efficiency in probabilistic terms (such as AI); some harness technowledge for emancipatory means (such as experiments with blockchain, cryptocurrencies, and decentralized complementary systems); others emerge as artistic, activist, or cultural expressions that correspond on conceptual or fictional levels (and often 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 debating our contemporary derivative condition.

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. Its dynamic recalibration regime revolutionized finance as it offered new access to trading future outcomes in the face of uncertainty and volatility. But given the edge of finance over the wider economy (e.g., dominance of circulation over production; displacement of value by price; leverage as a tool to inflate surplus value), its force now far exceeds its field of origin. 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, equations, and algorithms (that make derivatives large scale operational) prompted ever-increasing waves of data exploitation (a process that started in the 1970s). This rise not only constitutes a main source of what was later dubbed Big Data; in fact, derivatives performatively pre-structure the modes of how capitalism exploits volatility (risk) and the unknown (future). Instead of referring to data platforms as ‘Big Tech’, we should learn to read them as quantitative Hedge Funds that speculatively capture, capitalize, produce, and govern (future) individual behaviour and social patterns at any (micro)moment.

Derivative Performativity

The derivative condition that I sketch here presents one of my research projects. It explores the implementation of data-intensive, algorithmic processes based on scientific modelling, mathematical equations, AI, and data exhaust evaluation to leverage the dynamic recalibration of contingent claims (derivatives) at present. The project conceives of the derivative as a technopolitical innovation that introduced a new and pervasive level of exploitation. It argues that the derivative is the engine behind much of the abundance engineered in the last decades, albeit extremely asymmetrically.

Thus, in addition to a critique of the derivative’s devastating force in contemporary capitalism and its algorithmic and contractual (mis)applications, the project seeks to diagnose it as a paradigmatic technology that is not restricted to capitalist exploitation. While it has undeniably shaped capitalist economies, politics, and an increasingly catastrophic social and ecological reality, it could also be used to counter these massive forms of violence and injustice. Data-driven capitalism mediates abundance, notwithstanding the fact that accumulation and distribution continue to be highly asymmetrical and produce precarity and austerity for the many it denies leverage. But it is the derivative intervention that has facilitated the shift from scarcity to abundance in the first place. Instead of exclusively demonizing it, a critical reflection might therefore disentangle the derivative as to how the intellectual, technological, and financial wealth absorbed by the neoliberal mediation machine can be accessed towards the multiple potentials of the ecologies of commons. In this respect, I refer below to the semantic field of the term ‘resolution’ as a conceptual template and toolbox against non-transparency and asymmetry.

The derivative paradigm that I theorise is not just about a financial model of 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 initiated a turn from representative to performative ‘speech’ in the way power communicates more generally. Highly asymmetric regimes are not prevented from capitalizing on the performative evaluation, prediction, surveillance and enforcement of social automation, adaptation, and control. In our volatile world, derivative technowledge forms the framework of algorithmic governance.

Platform capitalism (digital service providers with enough monopolistic/oligopolistic data-power to privatize governance) escalates volatility and leverages information and access asymmetry. Twitter politics, for instance, demonstrate sophisticated but at the same time sociopathic symptoms of the derivative condition.

Noise turns into the ‘master of information’ when volatility is applied against probability. A prominent example is the arena of alt-right politics populated by hedge fund owners (such as Robert Mercer), data brokers (such as Cambridge Analytica) media interest groups (such as Breitbart), troll factories (for example from Russian) and politicians (like Farage or Donald Trump). The latter, for instance, redesigned Twitter as a dark pool in which the escalation of noise—that is, the production of volatility—turns into a 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 in electronic speed, leveraged by fake news and other malignant information asymmetries. This performative mode of power, with its production of volatility and its recalibration of leveraged contingent claims becomes not only paradigmatic for automation-based success; it also amplifies authoritarian symptoms.

While traditional methods of prediction (such as weather forecasts) are 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. A new temporality is ushered in. While the former derives from a probabilistic concept of representation, the latter indicates the turn to a performative regime of governance that strives to leverage the volatile indeterminacy in which the future emerges. Due to this worldview, mimesis shifts from reproduction by imitation to (self-)production via recalibrated approximation (e.g., the quantified self, online echo chambers, and social credit scores). Its range is not long-term but the micro-short term. This state of emergency, inherent in the word crisis, has become the platform on which reality is produced. 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 has become the paradigmatic claim—the ‘canon’—of technopolitical governance.

Social Asset Classes

Epistemic inquiry and aesthetic imagination rarely grasp the full scope of what the derivative has unleashed and what it exploits as resource—the wealth and power derived from liquidity (time), volatility (risk) and leverage (debt). Many studies of debt, for instance, neglect leverage as the other face of debt. They seem blind to leverage as liquid form of credit whose holders take advantage of volatility. I call this the biopower of the leverage class.

Powerful algorithms are rarely open source and do not exist in a legal void. They are owned and exploited (a current case from a field outside finance proper is OpenAI that was founded as an NGO but has since been incorporated). Hence, the question at the core of technocapitalist crises concerns ownership and its legally and politically protected interests. Leverage and volatility, I argue, are crucial to conceptualize how this biopower operates between private and state interest. (Robert Meister’s Justice is an Option, University of Chicago Press, 2021, develops a related critique based on liquidity).

A point in case can be made as regards the class system. In a nutshell, I argue that its contemporary regime materializes in social asset classes. The leverage class – the proprietary upper class of the ‘1 percent’ – performatively secures, rolls over or shifts between future potentials by their ability to borrow and recalibrate leveraged debt. The liquidity to do so has become the highly asymmetric prerequisite for access to freedom, free choice, and the legal system, not only in the West. Hence, the leverage class dominates the other tiers of debt classes. In case of (systemic) default, they externalize their toxic assets by socializing them to the debt classes pooled in nation states (e.g., by bailouts, public debt inflation, debasement, austerity politics). These debt classes differ by their respective credit and liquidity statuses as well as leverage opportunities (the degree to which they have turned themselves into assets via rent, income, collateral, contacts, etc.). The lowest tier has no access to the class system because they lack the credit to incur even small loans (a moral scandal for some market economists and entrepreneurs that they counteract, for instance, with microcredits). A growing number of credit scores, ratings and insurances deliver quantitative measures of behaviour, conduct and appreciation. These (meta)data are increasingly recalibrated in real-time and with AI support, dissolving the individual into a dynamically hedging portfolio of options compelled to self-recalibrate her value as asset, thus escalating the crisis of what used to be the post-fordist middle class. This non-transparent net of intricate inter-dependencies cast on a global scale is in the process of being upgraded to a self-regulating system informed with data delivered by those who are scored and rated, thus concretizing, and manifesting the volatile and contingent inclusion in, or exclusion from, a debt class. Neoliberal flexibility turns into technocapitalist plasticity.

Poietics of Resolution

But there is also another angle to the derivative condition, an antithesis that reads the derivative against the grain to unearth other forms of thinking and making. What I 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, ‘liquidity absorbing’ embrace of data-driven exploitation and authoritarian escalation politics. How can the notion of the derivative be accessed to give way to a collective and common meaning that counters a class system based on credit of self-assetization? And how can we leverage its abundance as care (crucially, a form of liquidity) for a more ecological sensibility? Here, I’d like to refer to a point made by Randy Martin on the ‘derivative logic.’ He argues that the derivative due to its pivotal position 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 techné in its own right, and as such not fully owned by capitalism, we can learn the ‘art’ of reorienting the derivative to resolve which other ways it may gift for other forms of world-making.

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

Renegade

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 betrays and 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. But while the renegade is often damned and stigmatized as a traitor (because she shares what must remain hidden), her counter-performative betrayal makes her also the educator of the demos, the general public and the institution of the law. Even though it often starts from the perspective of internal critique for improvement, the renegade act constitutes resistance taken to the level of insurrection. Such a ‘down rising’—a marginal, ambivalent, and precarious act but more promising than the uprising cry for transparency—destabilizes the technocapitalist discretion hegemony and its manufactured scarcity.

I should add that I do not treat resolution as probability consensus—in other words, as risk management. Instead, resolution points to an engagement with the impossible—to risks experienced and lived. The renegade is exposed to sheer limitless consequences—impossible personal risks—but her act of civil courage makes resolution possible across the whole range of the term’s meanings (realizing a problem, acquiring knowledge about it, tackling it, deciding, and resolving it). Disengaging with the capitalist infrastructure, which renders critique ineffective by exploiting or externalizing it, the renegade enters the realm of revolutionary negation.

The renegade, as conceived in the poietics of resolution, is a figure that exceeds conventional frameworks of critique and agency towards alliances that resist the false purity and determinacy of the technocapitalist doctrine. Hence, renegade activism is a call for emancipation as insurrection. Such renegade activism might seem to exist only at the margin of technocapitalism, but it sits, in fact, right at its core; its betrayal unlocks the black box. Leveraged by solidary alliances, such ethics of betrayal bear the potential to access wealth pre-empted by the capital-state nexus, finance conglomerates and data platforms, and to transform the acquiescent conditions of social automation and digitized labour.

The Agency of Resolution

The derivative condition offers a twofold tale or speculation: on the one hand, it engages in a radical 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 postdisciplinary research to various perspectives and findings to explore how this speculative agency is able to unearth whether the derivative can be resolved from capital and power accumulation towards a technowledge dedicated to supporting the more-than-human ecologies that emerge in the complex, volatile and contingent entanglements of our planet.

Finally, technocapitalist escalation might be on the verge of eclipsing itself. The incessant game of harnessing volatility for modes of asymmetric power causes an escalation of crises that are not ‘only’ social and ecological but also increasingly affect business plans (take for instance Zuckerberg’s Metaverse bet or Musk’s Twitter overreach). In the financial markets—the ‘place’ where capitalism remodels itself via future risk potentials and their recalibrated options—a hitherto heretical thought has gained some traction: there is a price on full market capitulation. A number of hedge funds bet on the end of their business model, also known as capitalism, and we should consider accepting the invitation. Can we grasp what the notion of the derivative may offer for redistributing wealth and resources to populations in their diversity instead of to a small elite? (Meister’s above-mentioned book explores another avenue in this respect.) To realise this, questions like these ones are pressing: How can we conceive of the derivative as speculative agency for cultivating care in economic as well as socio-ecological terms? How can we reorient the derivative towards taking and sharing risks together in multiple forms for varied needs and desires? To this end, the derivative condition is a speculation on opening access to a technowledge that is still quite obscure and strikingly uncharted relative to the immense impact it has had on the world(s) that we inhabit together.

* More about this approach can be found in some of my other texts (see, e.g., http://www.geraldnestler.net/texts_talks.html) like ‘Contingent Claims. The performativity of finance, or how the future materializes in technocapitalism,’ in: Jens Hauser and Lucie Strecker (eds.) On Microperformativity. Performance Research, 25/3, 2020 (https://doi.org/10.1080/13528165.2020.1807770).