Shared publicly  - 
 
I am somewhat appalled by the sloppy thinking of many of the Internet's latter-day critics. For example, in Joe Nocera's glowing review of Jaron Lanier's book, Who Owns The Future, I read:

"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.'”

Think about it for a minute. Was it really Instagram that replaced Kodak? Wasn't it actually Apple, Samsung, and the other smartphone makers who have replaced the camera?  And aren't there network providers, data centers, and equipment suppliers who provide the replacement for the film that Kodak once sold? Apple has 72,000 employees ( up from 10,000 in 2002. http://bit.ly/1lEY8HG). Samsung has 270,000 employees.  Comcast has 126,000. And so on.

Of course, there was a much larger ecosystem of people making money from photography in the Kodak era than those who worked for Kodak directly, but so too, the digital ecosystem is far larger than Lanier's silly example suggests. An economic ecosystem is a lot like an iceberg. Most of it is underwater. And shallow pronouncements like the one above do us all a disservice.

I do agree with Jaron Lanier's key point, as reported by Nocera:

“If Google and Facebook were smart,” he said, “they would want to enrich their own customers.” 

I agree with that point - and have repeatedly warned about the risks. See for example, my 2007 observations about lessons from Wall Street for internet companies, Trading for Their Own Account (http://radar.oreilly.com/2007/12/trading-for-their-own-account.html), and my repeated urgings for companies to create more value than they capture (http://bit.ly/1lF0d6y).  But I don't actually believe that internet companies are hollowing out the economy, and I do believe that many of them do think about enriching their customers.  See for example Hal Varian's analysis of the economic impact of Google advertising (http://www.google.com/economicimpact/) or my own analysis of the economic impact of the web hosting market on small business (http://radar.oreilly.com/2012/07/open-source-small-business-report.html).

Contrast this with the damage to the economy done by financial firms such as Goldman Sachs and JP Morgan, who have truly worked to enrich themselves at the expense of their customers and the public, and the Internet gets a pretty good grade.

The full story of the economic impact of digital networks has yet to unfold, let alone to be understood.  There is an awful lot of blind internet boosterism, but the latest round of critics seem even more wilfully blind than those they lambaste. For more nuanced, thoughtful reading on the impact of the internet, Nocera would do better to read books like +Ethan Zuckerman's _ Rewire_ (http://www.amazon.com/Rewire-Digital-Cosmopolitans-Age-Connection/dp/0393082830) or Andrew McAfee and Erik Brynjolffsson's Race Against the Machine and The Second Machine Age (http://www.amazon.com/Second-Machine-Age-Prosperity-Technologies-ebook/dp/B00D97HPQI/).
214
46
Turlough Rynne's profile photoHartmut Noack's profile photoDivyansh Yogi's profile photoDana Blankenhorn's profile photo
26 comments
 
Cherry picking of information is a big problem with a lot of this type of writing. Thomas Friedman does that in most of his work.
 
I agree with you Tim. This is a two-sided issue. Its not simple. The one thing that is destructive about the "digital economy" is not the efficiencies gained or nature of business online, but the fact large multinational search and social media corporations are making billions of dollars off the consumer's data, media, and innovations via advertising, then reselling our own data back to us. Billions of people are basically stripped of their ideas and data, allowing a handful of search engine companies to make fortunes off that data. We make nothing! And.....we lose privacy and all copyright of that data, as well. Its a completely corrupt system. Look at the fact that so many books now are searchable and online. Its a mass migration of our intellectual wealth into the hands of a few corporations. Add the fact these same companies now own so many patents and they are totally above the law.

That is why we need a new search paradigm and social media and World Wide Web design. It needs to empower and protect user data.....Users should be able to "sell their data" to search engines and social media.....not the other way around. Imagine a poor child in Kenya that takes a digital picture of a lion on the African plains, posts it online, and 50 companies around the world pay him to use his photo/search for his photo online? He now has money to buy for for his family from his images and he has automatic global copyright to his data. Democratization of data is what we need. It will have to happen.....but to do that we have to create a true 100%, open source search and social media Web thats free of advertising dollars.
 
That sort of argument style is all too common. The "expert" starts with a conclusion then tortures data points until they lead to that conclusion. The disappointing thing is that such sloppy thinking gets the endorsement of the NY Times. Printing opposing opinions is good but the editors should still require those opinion pieces make logical sense. I should amend that, the opinion piece didn't really take the book at face value, but claims from the book were repeated without being challenged. A casual reading suggests Nocera agrees with the book.
 
A lack of systems thinking seems to underlie much pundit stupidity. Plump cherries sell books but many twig-like links to not-so-exciting systemic nodes have more impact on overall systemic behavior.
 
Who shed a tear for the telegram companies when the phone replaced folks who physically ran out to deliver you a piece of paper? Who shed a tear for the cobblers who no longer made shoes? The blacksmiths? The local delicatessen and butchers?

Problem is you can pull out examples of companies that didn't adapt well given the new market. Kodak will be held up as an example of a company that didn't adapt but I'm sure the problem was more that it adapted the wrong way. People didn't want cheap digital cameras in lieu of film; they wanted ubiquitous cameras - cameras they didn't have to think to bring. Whether it was high quality digital or film didn't matter: the cheap camera you have is better than the any camera you didn't bring.

Sun Microsystems is another perfect example. Inexpensive Linux boxes replaced expensive Sun hardware not because it either one was markedly better but because the cost of failure could be easily mitigated with a Linux solution. The difference with Sun is there's still some technical merit to the company that Oracle is busily working to capitalize (or destroy, depending on your POV).

It's easy to say companies fail because they don't adapt to sweeping change and blame "digital culture" and the Internet as the disruptor that caused their downfall. But it's harder still to figure out adaptation that was supposed to mitigate the disruption but ultimately failed.
 
+Tim O'Reilly Nocera's biggest takeaway is the fact that we the users- we the people- are now the product which drives the value proposition and not the creation of assets.
 
I'd say that Kodak committed suicide, anyway. Back in the 90s they had some cutting edge pro digital cameras which had best-in-class image quality plus support for scripting and apps.
http://www.imaging-resource.com/PRODS/DC220/DC220Acgi.HTM

They ditched all their pro products in favor of cheap consumer digital cameras, which was exactly the market that was destroyed by mobile phones.
Rob Walsh
+
1
0
1
0
 
+Jefferson Martin We are not the product; I hate that faulty truism.  Nobody has sold or exchanged me for something else. If anything is "the product", it is our data: metadata about our purchases, and our habits; the things we say, the pictures we take, the things we find valuable enough to recommend (or complain about).  Not us.

And I willingly allow Google and Amazon (and less confidently, Facebook) have access to that data because there is a value exchange that benefits me.  They provide a platform for "publishing"; they offer reduced prices and valuable recommendations; they enable easy communication; etc.  

Just because no money changed hands between us doesn't mean the transaction doesn't have value, for both parties.
 
There is a big difference between free stuff given away for use of your data or presence, and a truly "free internet". The Internet is no longer free when people line up to steal your identity and your data for profit. We have lost our way....
 
+Mitch Stokely +Jefferson Martin I agree with +Rob Walsh. There is a mutual value exchange between users and these companies.  Remember the early flap about Google search, where companies sued to be excluded from Google?  The precipitous drop in their traffic when Google complied soon had them begging to be taken back.

It is true that there are many more opportunities for monetization than advertising, and individuals and companies need to explore them, but the notion that the platforms that allow us to share content with each other - at no cost to us - are ripping us off is just wrong.  That isn't to say that they might not rip us off - e.g. by selling our private information in ways we don't understand or agree to - but the basic exchange of value is a pretty compelling one, or we wouldn't all be agreeing to it.

If you think that it's a bad deal to put your content on Facebook or Twitter or Google+, don't do it. I suspect that the fact that you don't make that choice is a strong argument that you are getting value from your participation.
 
+Rob Walsh 
"We are not the product; I hate that faulty truism.  Nobody has sold or exchanged me for something else. If anything is "the product", it is our data: metadata about our purchases, and our habits; the things we say, the pictures we take, the things we find valuable enough to recommend (or complain about).  Not us."

There's a certain incoherence in this rationale, Rob. Consider for a moment that if there was value merely in the data/metadata, but no 'actor' to translate the statistical conclusions drawn from that data/metadata into actual value-exchange -- monetary or otherwise -- then the data/metadata would be meaningless.

So in compiling all of that behavioral data/metadata, there's some expectation by the people interested in that compilation, to be able to leverage/exploit/capitalize on a reasonably anticipated transaction.

Currently, that transaction is most often accomplished by individuals who act/behave -- mostly -- in accordance with the data/metadata collected about them.

We may be on the fringe of semantics here, but I think sometimes it's good to dance upon the fring, even if only to clarify the subtler aspects of terminology and intended meaning/scope :)
 
+Tim O'Reilly You could say that the damage done by financial firms is intimately tied to damage done by "Big Internet." It is the money that backs them (they wouldn't be Big Internet without it), and financial firms are thus pulling those strings. I definitely disagree with the simplistic arguments of "the Internet stole our jobs." But that trumpet has blown since there were steam engines and cotton gins. Maybe even before. If nothing else, his article illuminates how people still don't understand change as it's happening. 
 
+Tim O'Reilly That Kodak-Instagram example is quite dumb. But aren't you also cherry-picking from Jaron Lanier's arguments and attacking the weakest element ?

That NYT essay present's Jaron's arguments in a very shallow manner. Jaron himself did quite a better job. I haven't read the book (it's still on my reading list). But I saw some of his lectures on youtube in promotion of the book. The core idea behind the book, in my understanding, is that of the hidden commons to which the market assigns zero value. Like dumping trash into the ocean, gaming the market through computer simulation dumps externalties into the hidden commons. But even an ocean can hold only so much trash. I don't think the ideas in the book are mature, but they are definitely thought-provoking..
 
History repeats itself (history repeats itself (history repeats itself (ad infinitum)))...
 
The major flaw in such kind of thinking derives from the Calvinists mindset: "Working is always good, not working is evil."  They see the value in the hardship, in the sweat and effort of working. But the value is the outcome, the actual work, the goods it provides. So if 140 K people that used to work for Kodak do not have any reason to work for Kodak anymore, the Calvinist sees a loss of jobs. But these people where working to allow others to make pictures and this good is not gone at all.
The question is not: how to make everyone work. But: how to find ways to give everyone an opportunity to have an income.  If the economy actually thrives and flowers up, there is absolutely no excuse for letting anyone live in poverty.
Where does the billion go, that the 13 people at instagram had created? Will it rotate and thus create new income for more people?
That question is to be concerned by politics, if they rule wisely, the money will flow and people will make good money with new, usefull or at least funny things ;-)
 
+1 for the enlightening Consultation and Mr. O'Reilly's points. 
 
Nice piece. I"v never understood why Jaron Lanier got as much play as he has.

Companies that don't create more value than they consume should go out of business. Same for companies that don't enrich their customers. In both cases, why would anyone pay for their products or services?  BUT big banks seem to be a counter-example!
 
+Russ Abbott Jaron has been famous ever since VRML, but I haven't heard about that in weeks and weeks. 

+Tim O'Reilly  There is a growing dystopian chorus concerning technology and the Times, which is dying and being absorbed by Yahoo, is always ready to hear from it. 
 
I would challenge any users of the big information services (google, Facebook, apple...) to show that these companies don't enrich us. They give us free services that provide incredible value. Try disconnecting yourself and you'll see what you lose.

Lanier is entirely distracted by money.
 
Free services? really? w/ the 5 second commercial in between songs it makes me unplug and think. Thinking is free...
 
Irony is complaining about that here :-)
 
+Kiran Varanasi I don't agree with that argument. There is a real value exchange in these internet commons sites. Yes, companies are getting a lot of value from the shared data, but the users are getting a lot of value from the shared platform - for free! I think that Jaron's whole line of argument is quite specious, and the alternative, that everyone should get paid for their contributions, is silly. People do in fact get paid for their contributions when they are widely enough seen, and while some platforms (e.g. YouTube) are "under-monetizing" that is something that generally gets better over time.
 
+Paul Wolfe To the extent that big financial firms ever financed the internet, your argument would hold some water. But it's been a long time since the primary business of any of the big Wall Street banks was financing anyone but themselves. They are an extractive industry, trading against their customers, as the 2008 financial crisis showed, and the string of scandals since has confirmed.
Add a comment...