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A Brief Summary and Review
am 29. Mai 2013
*A full executive summary of this book will be available at newbooksinbrief dot com, on or before Tuesday, June 4, 2013.
The main argument: 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 (indexable websites on Google, Facebook pages on Facebook, LinkedIn profiles on LinkedIn, auction items on eBay, and music and video files on sharing sites). 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 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.) [This very website, it will be noticed, is a cog in this set up.]
As we can see, then, a big part of the value of these Internet companies comes from their users’ information, and the content providers 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 brought to the Internet companies), 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 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. 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 they contribute. 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.
Lanier’s book is a sprawling affair occasioned with numerous fairly bizarre flights of fancy (I didn’t mind this so much since Lanier is fairly interesting, and has a unique perspective), but the core ideas here are very intriguing and worthy of serious consideration. The problem with Lanier’s solution at this point is that the economy has not yet slumped enough in order to convince us that Lanier’s theory must be true, and that radical solutions are needed (and Lanier’s solution is radical). Nevertheless, should events continue to play out as Lanier foresees, his solution may well become attractive at some point. A full executive summary of the book will be available at newbooksinbrief dot com on or before Tuesday, June 4; a podcast discussion of the book will be available shortly thereafter.