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This disproportionate relationship between capital and value—or invested money versus actual revenue—is the hallmark of the dominant digital economy. If anything, the digital economy has laid bare the process by which cash, labor, and productive assets from the real, transactional marketplace are extracted and converted into frozen capital—all in the name of growth. Once money has been “captured” in a stock price, it tends to just sit there as if in a bank vault. This, in turn, puts pressure on the company to make more money, faster, in order to justify the new total value of all the stock. The disparity between a company’s net worth and its revenues gets even more extreme. Strangely enough, the companies do keep growing, but they don’t create or produce any value.
i really like how he nails the way the digital world just accelerates/reveals how the economy operates. need to come up with a variety of ways to refer to this
This is why the leading voices today are those that still treat the emerging digital economy as Industrialism 2.0 or, as Massachusetts Institute of Technology professors Erik Brynjolfsson and Andrew McAfee put it in the title of their respected business book, The Second Machine Age. It’s no wonder such ideas captivate the business community: for all their revolutionary bravado they are actually promising business as usual. Workers will continue to be displaced by automation, corporations will remain the major players in the economic landscape, and it’s up to people to keep up with the pace of technological change if they want to survive. This is not a revolutionary vision but a reactionary one. Everything is supposed to change except the economic platform and its bias toward growth—which is probably the most arbitrary piece in the whole puzzle.
love that he (rightly) calls them out for being reactionary
The unsustainable endgame is an economy based entirely on marketing and advertising. In its currently inflated state, the entirety of advertising, marketing, public relations, and associated research still accounts for less than 5 percent of gross domestic product (GDP), by the very most generous estimates.27 Furthermore, unscrupulous Web site owners have now learned to use robotic ad-viewing programs to juice their revenue from pay-per-click advertising. Most of these bot programs run secretly on the computers of everyday users in the form of malware, a kind of minivirus that co-opts a computer’s processing power. Bots now comprise an estimated 25 percent of all online video ad viewers and 10 percent of all static display ads. In 2015, advertisers are projected to lose $6.3 billion in pay-per-click fees to these imaginary viewers.28 Consider the irony: malware robots watch ads, monitored by automated tracking software that tailors each advertising message to suit the malbots’ automated habits, in a human-free feedback loop of ever-narrowing “personalization.” Nothing of value is created, but billions of dollars are made.
Though ingenious, Lanier’s solution could actually dehumanize things even further. If we are paid chiefly for our data, then we are all performing for the machines instead of one another. We are earning money not for the ways we create value for people but for all the passive activities that happen to be data intensive. Our only value to this digital economy comes from those aspects of ourselves that can be quantified. It may solve the problem of getting a whole bunch of activity back “on the books,” but to what end? So we can register some credits on a balance sheet? Must we accept “the books”—presumably, the double-entry ledger—as the fundamental operating system?
The problem with trying to get all human activity back on the books is that the books themselves are not neutral. They are artifacts of a very specific moment in human history—the beginning of the Renaissance—when the two-column ledger was instituted and everything came to be understood as a credit or a debit in a zero-sum game of capital management. Feeding more activity to the ledger simply cedes more of humanity and business alike to a growth-centric industrial model that was invented to thwart us to begin with.
a very specific critique of Jaron Lanier to draw on for diss
Besides, learning code is hard, particularly for adults who don’t remember their algebra and haven’t been raised thinking algorithmically. Learning code well enough to be a competent programmer is even harder. Although I certainly believe that any member of our highly digital society should be familiar with how these platforms work, universal code literacy won’t solve our employment crisis any more than the universal ability to read and write would result in a full-employment economy of book publishing.
It’s actually worse. A single computer program written by perhaps a dozen developers can wipe out hundreds of jobs. Digital companies employ ten times fewer people per dollar earned than traditional companies. Every time a company decides to relegate its computing to the cloud, it is free to release a few more IT employees. Most of the technologies we are currently developing replace or obsolesce far more employment opportunities than they create. Those that don’t—technologies that require ongoing human maintenance or participation to work—are not supported by venture capital for precisely this reason. They are considered unscalable because they require more paid human employees as the business grows.
link this to Patrick's NS piece
point of tech is to wipe out jobs
When technology increases productivity, a company has a new excuse to eliminate jobs and use the savings to reward its shareholders with dividends and stock buybacks. What would have been lost to wages is instead turned back into capital. So the middle class hollows out, and the only ones left making money are those depending on the passive returns from their investments.
This income disparity is not a fact of nature or an accident of capitalism, either, but part of its central code. Technology isn’t taking people’s jobs; rather, the industrial business plan is continuing to repress our ability to generate wealth and create value—this time, using digital technology. In other words, the values of the industrial economy are not succumbing to digital technology; digital technology is expressing the values of the industrial economy. The recent surge in productivity, according to Piketty, has taken this to a new level, so that the difference between capital and labor—profit and wages—is getting even bigger. Leading-edge digital businesses have ten times the revenue per employee as traditional businesses. Those who own the platforms, the algorithms, and the robots are the new landlords. Everybody else fights it out for the remaining jobs or tries to squeeze onto the profitable side of the inevitable power-law distribution of freelance creators.
But the beauty of living in a digital age is that the codes by which we are living—not just the computer codes but all of our laws and operating systems—become more apparent and fungible. Like time-elapsed film of a flower opening or the sun moving through the sky, the speed of digital processes helps us see cycles that may have been hidden to us before. The fact that these processes are themselves comprised of code—of rules written by people—prepares us to intervene on our own behalf.
the last paragraph is lovely and so aligned with my thoughts on this!!
A surplus of productivity should not be a problem. It’s only troublesome in an economy in which markets are driven by scarcity alone and value is understood as something to be extracted from people rather than created for them. That’s the zero-sum economic approach that sees something like, say, renewable energy as such a problem: how do we compensate for the loss of profit to be derived from digging oil out of the ground? When an economy has been based in exploiting real and artificial scarcity, the notion of a surplus of almost anything is a mortal threat. As individuals living in an economic landscape constructed over centuries to remove humans altogether, we fear being sacked the moment we are no longer necessary to our employers. As business owners, we fear technologies that render our claim to scarce resources or other competitive advantages obsolete.
We’ve gotten too competent to maintain this position. Rather, we must take a step outside the economic model in which we are living and accept the potentially scary truth that we have finally succeeded. In spite of our dehumanized approach (or maybe because of it), we have managed to produce enough stuff to give out a livable share to everyone as a matter of course, and for free. A whole lot of what used to be scarce is now plentiful, and between 3-D printing and other forms of distributed production, the rest of everything could turn out to be plentiful as well. We may be approaching what economic futurist Jeremy Rifkin calls “the zero marginal cost society,” in which new technologies reduce the cost of everything to nearly nothing at all.
he does go on to be skeptical about the Rifkin hypothesis in the next paragraph (who manufactures the 3D printers, etc) but I like how similar his perspective is to mine on this (need to reimagine etc)
The best part about looking at the corporation as a technology or medium is that, in the process, we remind ourselves that it didn’t just emerge as a natural phenomenon. It’s not as if businesses were getting so big that they evolved a corporate structure in order to keep growing properly. Quite the contrary: the corporation was invented by monarchs to stem the tide of a burgeoning middle class and its thriving new marketplace and usurp the growth they were enjoying. The fact that corporations were invented should alone empower us to _re_invent them to our liking.
So, then, what were corporations invented to amplify? The power of shareholders and the primacy of their capital. Feudal lords, who had lived off the labor of peasants for centuries, were getting poorer as the people began to make and trade goods with one another. The aristocracy needed a way to preserve their wealth and position in an increasingly free market. So they invented the chartered monopoly—a piece of paper with a list of rules—through which a king could grant exclusive dominion over an industry to his favorite merchant. In return, the king and other aristocrats got the right to invest in the enterprise. This way, they could use their wealth alone to make more money. Did the merchant need investors? For the most part, no. But he made this concession in order to get the king’s charter and protection. The investors were like shareholders, and the merchant was like the CEO. Except these shareholders were also the ones writing the laws of the land.
[...] Even digital companies that have grown too wealthy and unwieldy, such as Facebook and Google, now innovate through acquisition of startups—for which they pay a king’s ransom. Google has turned itself into a holding company, Alphabet, as if to better reflect its new role as the purchaser of other firms’ ideas. Standard accounting practice encourages it, because acquisitions are treated as capital expenditures, while real R & D counts as an expense against earnings. Once the new acquisition is absorbed, however, it is subjected to the same sorts of cost cutting that befell the parent. The expected “synergies” never quite pan out, which is why 80 percent of mergers and acquisitions end up reducing profit on both sides of the deal.