Tuesday, January 7, 2014

Will Digital Networks Ruin Us?

JB note: The below also pertains to Facebook: its content is provided by its users "free of charge." 

Will Digital Networks Ruin Us?
By JOE NOCERA, New York Times

The most important book I read in 2013 was Jaron Lanier’s “Who Owns the Future?” Though it was published in May, I came to it late in the year. But this turned out to be fortuitous timing. With unemployment seemingly stalled out at around 7 percent in the aftermath of the Great Recession, with the leak of thousands of National Security Agency documents making news almost daily, with the continuing stories about the erosion of privacy in the digital economy, “Who Owns the Future?” puts forth a kind of universal theory that ties all these things together. It also puts forth some provocative, unconventional ideas for ensuring that the inevitable dominance of software in every corner of society will be healthy instead of harmful.

Lanier has an unusual authority to criticize the digital economy: He was there, more or less, at the creation. Among (many) other things, he founded the first company to sell virtual reality products. Another of his start-ups was sold to Google. As a consultant, he has had assignments with “Wal-Mart, Fannie Mae, major banks and hedge funds,” as he notes in “Who Owns the Future?” But unlike most of his fellow technologists, he eventually came to feel that the rise of digital networks was no panacea.

On the contrary: “What I came away with from having access to these varied worlds was a realization that they were all remarkably similar,” he writes. “The big players often gained benefits from digital networks to an amazing degree, but they were also constrained, even imprisoned, by the same dynamics.”

Over time, the same network efficiencies that had given them their great advantages would become the instrument of their failures. In the financial services industry, it led to the financial crisis. In the case of Wal-Mart, its adoption of technology to manage its supply chain at first reaped great benefits, but over time it cost competitors and suppliers hundreds of thousands of jobs, thus “gradually impoverishing its own customer base,” as Lanier put it to me.

The N.S.A.? It developed computer technology that could monitor the entire world — and, in the process, lost control of the contractors it employed. As for Facebook, Google, Twitter, Amazon et al., well, in Lanier’s view, it’s only a matter of time before their advantages, too, disintegrate.

There are two additional components to Lanier’s thesis. The first is that the digital economy has done as much as any single thing to hollow out the middle class. (When I asked him about the effect of globalization, he said that globalization was “just one form of network efficiency.” See what I mean about a universal theory?) His great example here is Kodak and Instagram. At its height, writes Lanier “Kodak employed more than 140,000 people.” Yes, Kodak made plenty of mistakes, but look at what is replacing it: “When Instagram was sold to Facebook for a billion dollars in 2012, it employed only 13 people.”

Which leads nicely to Lanier’s final big point: that the value of these new companies comes from us. “Instagram isn’t worth a billion dollars just because those 13 employees are extraordinary,” he writes. “Instead, its value comes from the millions of users who contribute to the network without being paid for it.” He adds, “Networks need a great number of people to participate in them to generate significant value. But when they have them, only a small number of people get paid. This has the net effect of centralizing wealth and limiting overall economic growth.” Thus, in Lanier’s view, is income inequality also partly a consequence of the digital economy.

It is Lanier’s radical idea that people should get paid whenever their information is used. He envisions a different kind of digital economy, in which creators of content — whether a blog post or a Facebook photograph — would receive micropayments whenever that content was used. A digital economy that appears to give things away for free — in return for being able to invade the privacy of its customers for commercial gain — isn’t free at all, he argues.

Lanier’s ideas raise as many questions as they answer, and he makes no pretense to having it all figured out. “I know some of this will turn out to be wrong,” he told me. “But I just don’t know which part.”

Still his ideas about reformulating the economy — creating what he calls a “humanistic economy” — offer much food for thought. Lanier wants to create a dynamic where digital networks expand the pie rather than shrink it, and rebuild the middle class instead of destroying it.

“If Google and Facebook were smart,” he said, “they would want to enrich their own customers.” So far, he adds, Silicon Valley has made “the stupid choice” — to grow their businesses at the expense of their own customers.

Lanier’s message is that it can’t last. And it won’t.

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