Lanier: Silicon Valley Killing Middle Class

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Who?  Who?
Who? Who?

Lanier: Silicon Valley Making the “Stupid Choice”

This piece by NYT columnist Joe Nocera on his read of Jaron Lanier’s book Who Owns the Future is thought-provoking and worth serious consideration by policy makers in the government especially, if only because colossal Silicon Valley greed blinds technology companies to the economic destruction their technology is raining down upon their customers, so other forces need to reign them in before it is too late.

Amazon Page
Amazon Page

Some excerpts:

“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.”<

“Over time, the same network efficiencies that had given them [big companies] 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.”

“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.”

More, including an example of a solution:

Will Digital Networks Ruin Us