Wednesday, January 22, 2014

Who Owns the Future?

In Who Owns the Future?  (Simon & Schuster, 2013), virtual-reality pioneer and futurist Jaron Lanier succeeds in doing what no economist (so far) has been able to do, which is to provide a credible explanation for the perverse persistence of the current economic downturn while also outlining a possible path to a new resurgence of the middle class (reversing its current state of rapid decline). But the story he tells is by no means all brightness and light. This is not another ├╝ber-technologist giving us a saccharine "technology will fix everything in the end" Weltanschaung.  Lanier's interpretation of current Information Economy reality is a chilling one, and the implication that a special kind of doom awaits us if we do nothing (as politicians and others in a position of power are wont to do these days) reverberates throughout.

Lanier's contention is that the leviathans of the information economy—not just Google, Amazon, Facebook, eBay, and so forth, but also Apple, Walmart, and many others who have used Big Data to reimagine and reconfigure their supply chain
s—derive their wealth (and power) from hundreds of millions of people (that's us) who supply personal data (not just name and address, but info about browsing, reading, and purchasing habits) to these giants for free. Google's $130 billion valuation is due not to any facilities or land they own, not to their employee headcount, not to any magic computer code (no codebase in the world is worth $130 billion), but rather, stems directly from the ability of Google to spy on hundreds of millions of people. Without the people-data, Google's business model, based on contextual placement of ad links, doesn't exist. With suitable variations, the same holds true for Amazon and all the rest. 

Think of it this way: Google has a focus group. It contains around a billion people. Google knows the searching, browsing, purchasing, e-mailing, document-storing/creation/sharing, scheduling (Google Calendar), reading (Google Books), and other habits of those billion-or-so people. (The information available to Google through the Chrome browser, which is a type of full-time spying device, or the Android OS, another full-time spying environment, is mind-boggling.) But no one in the focus group gets paid for this exquisitvely valuable (indeed priceless) information. The spoils go directly to Google and its workers and stockholders. They get paid. The rest of us don't.

Proudhon would call it straight-up theft. In Lanier's view, it amounts to an accounting irregularity that should be corrected at once—not just for the benefit of the average person but for the long-term survival of Google, Facebook, etc. According to Lanier, you and I and all other users of ad-festooned websites should be compensated, on an ongoing basis, for the use of our private and public data (including all data pertaining to browsing, purchasing, etc. habits), via a system of micropayments that would register whenever information derived from you is captured. He doesn't say how big these micropayments might be, but he maintains that in the long run, such a system (of compensating ordinary people for the use of their online behaviors) would significantly strengthen a middle class that's currently on the way to disappearing. So we're not talking a trivial amount of money.

Why is it in Google's (and others') interests to do this? Because over the long haul, the current system is unsustainable. To put it more bluntly, at some point in the future there won't be a purchasing class (a middle class) to spy on. All the "good jobs" will have disappeared. A small Mandarin class of technocrats will exist to maintain the info-plutocracy, but in the meantime the rest of us will be flipping burgers (or doing whatever it is burger-flippers do in future generations).

Lanier states flat-out (on p. 19 of his book) that "The Internet has destroyed more jobs than it has created." He cites a number of examples, mostly famously that of Kodak. At the height of its power, Kodak employed 140,000 people and was worth $28 billion. By the time digital photography became a throwaway feature of cell phones, Kodak disappeared and we had Instagram. Meanwhile, Instagramwhen it was purchased by Facebook for a billion dollarsemployed 13 people. One can argue endlessly about whether Instagram was fairly valued or whether any discussion of Instagram in relation to Kodak is apropos, but does anyone seriously question that Amazon has reconfigured the bookstore industry to employ fewer people? Does anyone seriously question that Walmart (with its computerized supply chain and Chinese maufacturing operations) has put ma-and-pa stores out of business? Add up all the Kodaks and mall closures, etc., and you end up with what we have now, which is a situation where there are three unemployed persons for every job opening in the U.S., otherwise known as structural unemployment, or (how about plain English?) mass suffering. 

President Obama and many others (including past presidents of both administrations) have bought into, and continue to sell, the myth that more education—more degrees in science, math, and technology, in particular—will enable us, somehow (by magic, apparently), to bootstrap our way out of our current predicament. They tell us this even as science, math, and technology jobs regularly get outsourced to India. Lanier buys into no such sophistry. He explains how even fields like surgery and nursing (once thought to be invulnerable) are being automated, reducing employment prospects for even the very well educated. Anyone who doesn't believe "good jobs" for the well educated are going away need only talk to a recent Ph.D. graduate. (See "A Generation of Jobless PhDs.") University degrees are becoming less valuable by the minute, even as the cost of obtaining them soars out of reach.

The arts have always been a hard place to earn a living. In the Information Economy it's become even harder. Lanier (himself a musician) explains, in some detail, the sad story of what's become of the music industry; then he reports how the same scenario has played out (and continues to be played out) for authors, videographers, photographers, and others, creating a lotto-like winner-take-all star system in which a relative handful of lucky YouTube and Amazon indies (those for whom sales or views happen to go viral, essentially) win the online lotto, providing the success stories that motivate thousands or millions of others who will go on to fail. The point being, if every field becomes as hard to break into (and succeed at) as acting, music, or (now) writing, there will be a lot of starving artists out there. Wouldn't it be fairer if every time someone downloaded something you created (whether it's a photo, a blog, a short story, a video, or whatever) you got paid something? Information, after all, isn't really free. We pay for it with our online lives, which are pirated on a mass scale by Google and all the rest. Right now, the information about your online life that gets harvested and processed by Google (by programs that sift through your mail, take note of your search habits, track your site visitations, etc.) is not shown on Google's books as having any intrinsic value; the raw materials are valued at nothing. The value shows up later when Google puts an ad for a firearms training course next to the e-mail you wrote mentioning squirt guns. Google profits from raw materials it doesn't pay for. Few industries enjoy such an advantage.

When information is no longer free, you'll have to pay something, of course, to use a service like Wikipedia, or to watch that hilarious video that's making the rounds. But Lanier says right now, the balance of accounting is so out of whack, so massively in favor of Google, Amazon, Facebook, etc., that if accurate accounting were done (if the books were properly kept), ordinary web users would still come out way ahead, even if you had to pay a micropayment of some kind for every site you visited. Amazon, Google, etc. would continue to exist, but they'd pay for raw materialsand you would know exactly what information they acquired about you. You'd be able to opt out of their spying activities; but chances are, you wouldn't want to miss out on the income.

Jaron Lanier
Lanier's book is light on actual computation, ironically, but it's clear that the combined revenues of the top several hundred digital brands comes to many trillions of dollars, which means that even if a billion or more web customers participated in the profit-sharing, rebates to online customers would amount to thousands of dollars per person per year. I suspect the reason Lanier didn't trot out the actual calculations isn't that the accounting doesn't favor his position but because it would only cloud the basic argument. With Who Owns the Future, Lanier is trying to start a dialog. I can understand him not wanting to get sidetracked with details before we know what we're arguing about. Still, critics will want to see pro formas. In any future editions of this book I would expect to see an Appendix showing some actual numbers justifying the major ideas in the book. As it stands, that level of specificity is lacking; and it tends to weaken Lanier's case, IMHO.

Criticisms aside, Lanier's book deserves serious consideration, right now, today, by technocrats, economists, politicians, planners, and (of course) CEOs and board members of top companies. The path we're on now—toward ever-greater automation, and subsumption of the proton economy into a world of electrons
—has led and continues to lead toward loss of "good" jobs and the massive enrichment of the few, while the private data of the many are compromised. The "market efficiencies" brought about by Amazon and Walmart are not putting more people to work; what we've gotten, in fact, is a net loss, not only in quantity but quality of jobs. Today, it's three unemployed Americans for every job opening; tomorrow it will be four. At what point do we stop and take Lanier's arguments seriously? I think we're reached that point now. We ignore the arguments in his book at our own peril.