Table of Contents:
- a. Consumer-Facing Internet Companies
- b. The Behind the Scenes Data-Scrapers
- a. The Two-Way Linking Network
- b. The Role of Companies and Corporations
- c. Centralized Governance
Not so long ago the Internet was seen as the next great economic engine. The optimism was never higher than at the peak of the dot-com boom in the late 1990s, of course; but even after the dot-com bust in the early 2000s, many believed that this was but the growing pains of an emerging industry, and that in the long run the Internet would yet provide the foundation for a new and improved information economy.
Since that time, it is certainly the case that the Internet has spawned a few major successes (such as Google, Amazon, eBay and now Facebook), as well as a host of hopefuls (such as Twitter, Kickstarter, Pinterest and Instagram). However, it cannot be said that the economy has enjoyed a great boost since the Internet exploded. On the contrary, the economy has, at best, stagnated—and it currently shows no signs of escaping its slump. So what went wrong?
According to Silicon Valley luminary Jarion Lanier, the problem is not so much with the Internet per se, but with how it has been set up, and how the major Internet companies themselves are organized. To begin with, major Internet companies tend to form monopolies, or near-monopolies, and on a global scale (mainly because Internet networks are able to reach a global audience and undercut local players, but also because these networks are more valuable to their users as they grow larger [for instance, it is most convenient to just join Facebook to connect with friends because this is the platform that most people, for whatever reason, have come to use—it just simplifies things]). The formation of monopolies and near monopolies destroys competition, of course, which compromises economic growth.
Even more important than this, though, is that Internet megaliths employ relatively few people, and have very little overhead (thus they simply don’t contribute much back to the economy). You see, the business plan of most successful Internet companies is to offer a particular service for free (such as Internet search efficiency with Google, or social connecting with Facebook, or business connecting with LinkedIn, or an auction platform with eBay, or music and video files on a sharing site etc). The framework of the platform is provided by the company, but the content of the service is provided by the users and/or the general public (indexable websites on Google, Facebook pages on Facebook, LinkedIn profiles on LinkedIn, auction items on eBay, and music and video files on sharing sites etc.). The site attracts users with the prospect of a free and useful service, and the site itself makes revenue through selling advertising space. Oftentimes, the company collects information from its users through its activities on the platform, and uses this information to help target them with ads (among other things) and/or sells this information to third parties so these third parties can use it themselves. (Lanier calls companies that operate in this way Siren Servers—the term applies to any company or organization that uses data streams to garner wealth and power.)
As we can see, then, a big part of the value of these Internet companies comes from their users’ content and information—as well as the content of third parties whose material is being shared no end. Now, if these users and content providers were being paid fairly for their contributions (according to how much value they bring to the Internet companies, and other Siren Servers, who use it), we could surely expect a major economic boost as a result. Instead, the users and content providers are paid nothing for their contributions (or at most a fraction of what their contributions represent). The end result of this is that wealth is concentrated at the top—in the hands of the major Internet companies and other Siren Servers—and the economy as a whole suffers (since few jobs are created to allow the wealth to trickle down).
And that’s just the beginning. The fact is that more and more things are being digitized as we move forward (for instance, driving is being digitized through driverless cars, education lessons are being digitized through being recorded on digital equipment, and even physical objects are being digitized through 3D printing). As things become digitized they become capable of being shared over the Internet for next to nothing. This will inevitably mean the further erosion of productive jobs (and whole industries—such as has already occurred in the music and video industries).
Ultimately, the only wealth-generating endeavor left will be the Internet platforms that share all of this information—or provide other free services. Of course, with nothing productive left to advertise, their revenues will fall off as well, so even they won’t be making any money. For Lanier, this is the fate we can expect unless we change the game we are currently playing.
The long short of it is that we must find a way to pay people adequately for the information and content they contribute to the information economy. Lanier argues this means reorganizing the Internet in such a way that informational transactions are monetized—such that the users of information are charged and the providers are paid for each transaction. It is not going to be easy to reorganize the Internet in this way–not only technically, but also because we have all become accustomed to using the Internet the way it is (and we like getting things for ‘free’).
Ultimately, though, we will have no choice, for our current course is leading us to an economy that is dominated by wealth at the top—and eventually no wealth for anyone. At some point, this state of affairs must lead to a revolt and/or a complete breakdown.
Here is Jaron Lanier discussing his new book:
What follows is a full executive summary of Who Own the Future? by Jaron Lanier
PART I: THE PROBLEM
Section A: How the Information Economy Works
1. The Story of Technology, Work and Economics
The story of technology, work and economics traditionally goes like this: a new technology is invented that allows us to accomplish a particular task more efficiently, so fewer people are needed to perform that task. Many people lose their jobs as a result (and these people often become angry and afraid). Eventually, though, new ways to generate value are found, and those who had originally lost their jobs are able to assume those roles and get new jobs. The economy grows.
Take that most quintessential of tools, the plow, for instance. This tool made farming much more efficient, so fewer farmers were needed to produce the same amount (or even more) food. Many farmers became redundant. However, opportunities arose to specialize in craft-making, so the redundant farmers had new opportunities to make money, and did so. The economy grew.
As mentioned above, though, the period during which the new technology is coming into play, and people are losing their old jobs, can be a frightening time. People need to feed their families, after all; and it’s often not clear at first whether and how this will be possible. This often generates anger, mainly directed at the new technology, but also at those who made it possible, or are using it.
The most famous example of this involves the Luddites of the 19th century. In the early 19th century more advanced looms were invented that threw many textiles workers in England out of work (loc. 2157). The newly layed-off textile workers got angry and revolted. Specifically, they went about the country laying waste to the new machinery and the factories in which they were housed (loc. 2157). The government eventually cracked down, of course, and the movement was largely put to rest (loc. 2157). More importantly, though, is that in the long-term further developments led to more work in the factories, so the disgruntled Luddites lost their motivation for revolt regardless.
This pattern has been repeated time and again throughout history (though not normally as violently) (loc. 2161). And many argue that the same thing is happening now with the new information economy (loc. 2165). That is, we are in the stage where the economy is losing jobs, but new ways of adding value will eventually emerge, and this will result in more jobs and a growing economy.
For Lanier, it is already the case that the Internet has provided new ways of adding value to the system (new value is added every day as people contribute information and content to the Internet and its companies). The problem, though, is that for the most part these contributions are not being rewarded monetarily. What this means is that these sources of value are not finding their way into the formal economy, and thus the economy is flattening out.
Let’s now take a closer look at how all of this is unfolding…
2. Siren Servers
a. Consumer-Facing Internet Companies
In order to understand how the information economy works it is best to begin by way of looking at how the Internet’s most successful companies operate. For indeed, as Lanier points out, the Internet’s major players tend to share a similar business plan (when they do have a business plan), or at least have much in common. As mentioned in the introduction, most successful Internet companies offer some service for free (loc. 253, 307, 2040, 2429, 2734-38, 2750, 2789) (there are some notable exceptions, such as Amazon and Apple, but let us stick with the rule for now).
*For prospective buyers: To get a good indication of how this (and other) articles look before purchasing, I’ve made several of my past articles available for free. Each of my articles follows the same form and is similar in length (15-20 pages). The free articles are available here: Free Articles