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How the Social Tech Bubble Is Different

Posted by samzenpus on from the history-repeating dept.

theodp writes "Tech bubbles happen, writes BW's Ashlee Vance, but we usually gain from the innovation left behind. But this one — driven by social networking — could leave us empty-handed. Math whiz Jeff Hammerbacher provides a good case study. One year out of Harvard, 23-year-old Hammerbacher arrived at Facebook, was given the lofty title of research scientist and put to work analyzing how people used the social networking service. Over the next two years, Hammerbacher assembled a team that built a new class of analytical technology, one which translated insights into people's relationships, tendencies, and desires into precision advertising and higher sales. But something gnawed at him. Hammerbacher looked around Silicon Valley at companies like his own, Google, and Twitter, and saw his peers wasting their talents. 'The best minds of my generation are thinking about how to make people click ads,' he says. 'That sucks.' Silicon Valley historian Christophe Lecuyer agrees: 'It's clear that the new industry that is building around Internet advertising and these other services doesn't create that many jobs. The loss of manufacturing and design know-how is truly worrisome.'"

29 of 388 comments (clear)

  1. Yeah, This Time It's Different by WrongSizeGlass · · Score: 2, Insightful

    Every time is different, right? Isn't that what they always tell us??

    1. Re:Yeah, This Time It's Different by Surt · · Score: 5, Insightful

      Yes, but to be clear, they are saying that this one is not only going to bust, it is going to be worse because there is less fundamental real value.

      --
      "Who is the Journal of Quantum Physics going to believe?" --Stephen Hawking
    2. Re:Yeah, This Time It's Different by fuzzyfuzzyfungus · · Score: 5, Insightful

      At least the internet ad-clicking business should be able to implode relatively neatly into a pile of its own worthlessness, rather than blowing up outward and taking a nontrivial chunk of the real economy with it, like our last adventure in letting smart people produce nonsense for money. Plus, Facebook doesn't quite enjoy Goldman-Sachs levels of regulatory capture, so we might even avoid paying the people who fucked it up. Progress!

    3. Re:Yeah, This Time It's Different by russotto · · Score: 3, Insightful

      Yes, but to be clear, they are saying that this one is not only going to bust, it is going to be worse because there is less fundamental real value.

      Less fundamental value than pets.com and drkoop.com? That's quite a bar to meet.

    4. Re:Yeah, This Time It's Different by hairyfeet · · Score: 4, Insightful

      Ya know, I really think we outta give credit where credit is due, and I don't see how these young 'uns will ever be able to top the level of worthless in Cuecat. I mean get VCs to pay for scanners to be passed out so folks can go to the trouble of hooking it up, installing a buggy driver that spied on you AND all for the "privilege" of scanning AN AD so you could be hit with ads on your PC? that is sheer genius levels of worthless right there pal, I don't see FB or any of these kids being able to top THAT nuclear powered failure!

      I think the bigger question than "what happens when this bubble bursts" is the much more fundamental question of "What do you do when you don't have a use for people anymore?" Because as it is we are ALL playing IQ musical chairs with less seats for a bigger population every. single. day. and the next to go WILL be the entire service industry. what then?

      You think MickeyD's bitches about having to pay minimum wage now, which frankly in America one can't live on and actually keep from going under, what do you think they will do when they can replace the ENTIRE workforce with machines? hell there really isn't anything that can't be done in your average fast food joint that assembly line automation couldn't do better, more accurately, and 24/7 without breaks, the only thing keeping them with humans is cost, but what happens when the robot is cheaper? you can't expect to hire everyone part time at $6 an hour when gas is $6 a gallon and a bag of groceries costs them $60, so what then?

      I'd say you have a good 60% of the population that are working C and D level jobs that WILL be either shipped overseas where there is no working regs and you can run sweatshops and pollute the entire area, what are we gonna do with them? Execute them? lock them up? make up bullshit jobs (BTW currently government employs MORE than manufacturing, farming, fishing, forestry, mining and utilities combined source here) so now what?

      So I'd say that is the bigger question we are facing. If the top 25% have everything while the bottom 75% starve society will collapse, crime will be rampant as they try to survive, yet at the same time we simply don't need the labor of more and more people on this planet. What do we do with these jobless masses? Blowing more bubbles doesn't change it, neither does pushing the "education!" meme that politicians keep harping about while ignoring that more and more that graduate from all these colleges and trade schools have nothing to show but debt they can't pay, because in the end machines will do it better.

      And before anyone pops in with the capitalist meme of "wages will go down and they'll balance!" I'd like to point to what the race to the bottom gets us, aka the the Halliburton clause where more and more of our precious water is being contaminated and being rendered unfit for use by those that want to make money NOW and screw later. Meanwhile the super rich just got a giant tax break thanks to outright bribery, so trying to beat the third world at who can be the most polluted and corrupt probably ain't the right way to go, that is unless you like the idea of paying $10 for a bottle of drinkable water and having your kids wear masks just to go outside.

      --
      ACs don't waste your time replying, your posts are never seen by me.
    5. Re:Yeah, This Time It's Different by hoppo · · Score: 3, Insightful

      Yes, but to be clear, they are saying that this one is not only going to bust, it is going to be worse because there is less fundamental real value.

      From what are you deriving your analysis that the tech industry of today has less fundamental real value than in the first dot com era? Given that it's /., I'm guessing your statement is rectally-originated, but I'll give you the benefit of the doubt.

      The real difference of today is that a lot of these companies actually DO have real value. 9- or 10-figure IPOs in 1999 were not unheard of, and they were happening for businesses that not only had no revenue streams, but had no plans for making revenue. The scale on which these companies operated could not be justified with the size of the potential customer base -- the number of millions of people online at the time could be counted on two hands, which makes selling a billion dollars of pet supplies in a year a rather daunting feat. The industry has changed, drastically, since then. Most of the money is around online marketing, which has a good reach, now that potential audiences are measured in billions, not millions. Microtransactions are now capable of supporting a multi-billion dollar operation. This was unheard of over 10 years ago.

      This is not to say there won't be another tech bubble. It is legitimately scary when you consider the exuberance around a handful of companies whose path to money is sketchy at best. However, we'll see how severe the bubble is -- there is less investment money to go around, IPOs aren't popping out of thin air, and a very healthy portion of the companies in the general sector are at a minimum cash-positive.

    6. Re:Yeah, This Time It's Different by dargaud · · Score: 4, Insightful

      In a sensible economic system, if all the work could be done by machines, we'd live in abundance. Alan Watts had an interesting idea about how each citizen ought to get a share in the wealth created the machines.

      Re-read science fiction stories from the 50s: they already thought about plenty of variations of that. What they didn't think about would be that the investors of those machines would get 90% of the profits and leave the others to rot. Why wouldn't they, they have the money, the political influence and the power, so why would they share any of it, short of plenty of heads on spikes like in 1789.

      --
      Non-Linux Penguins ?
    7. Re:Yeah, This Time It's Different by fuzzyfuzzyfungus · · Score: 3, Insightful

      Bubbles are, unfortunately, never entirely collateral-damage free. However, compared to the impact of a bubble involving an unholy alliance of the financial services sector and the residential credit/residential construction sector(the first of which has its tentacles in just about everything, the world over, and crazy levels of regulatory capture and the second is strongly coupled to where real people really live, and also has the magic 'homeownership' ticket to favorable legislative treatment) a bubble involving the socialclickfraud.com sector should be comparatively self-contained.

      Not zero, basically nothing in an interlinked economy can be, but there is a relatively clean collapse vector, where a few VCs lose their shirts, a bunch of companies learn that 80% of their "value" was in pretend internet money, the ones that offer a service people actually want start charging modest monthly fees, the others go out of business and their coders are reduced to designing IE6 compatible 'enterprise portals'(may god have mercy upon their souls).

      Bubbles are always bad; but, as bubbles go, I'd take 'social' over a lot of other things.

  2. Amen. by Anonymous Coward · · Score: 5, Insightful

    "The best minds of my generation are thinking about how to make people click ads" - Has there ever been a brief description that describes so well the technological time we live in? Hammerbacher should write a book or two.

    1. Re:Amen. by cyber-vandal · · Score: 4, Insightful

      And the easily annoyed minds are finding ways to turn the ads off.

    2. Re:Amen. by Surt · · Score: 5, Insightful

      The best minds of his generation are not, in fact, thinking about how to make people click ads. He's just so far from that tier that he doesn't even know a single person in it.

      --
      "Who is the Journal of Quantum Physics going to believe?" --Stephen Hawking
    3. Re:Amen. by Concerned+Onlooker · · Score: 4, Insightful

      Or a poem. You know...

      "I saw the best minds of my generation destroyed by Facebook, intellectually starving hysterical,

      dragging themselves through the focus groups at dawn looking for a fiscal algorithm,

      angelheaded codesters burning for the ancient heavenly connection to the starry cache in the motherboard of night,

      who wealth and splendid raiment and hollow-eyed and high sat up smoking in the supernatural darkness of luxury flats floating across the tops of cities contemplating more..."

      --
      http://www.rootstrikers.org/
    4. Re:Amen. by Anonymous Coward · · Score: 2, Insightful

      The best minds of his generation are not, in fact, thinking about how to make people click ads. He's just so far from that tier that he doesn't even know a single person in it.

      The only way to survive a job where one has to study the clicking of ads (with the intend to get more clicks), is by thinking that one must be among the finest minds of this generation.

    5. Re:Amen. by mcover · · Score: 4, Insightful

      "The best minds of my generation are thinking about how to make people click ads" - Has there ever been a brief description that describes so well the technological time we live in? Hammerbacher should write a book or two.

      His statement might be flawed: Maybe so that many bright minds of our generation work for these companies, but these companies don't just "make people click ads". It might be at their business's core, however, they provide services which many of us embrace while they last and it helps us be more productive (exceptions exist), which in turn contributes to the overall achievements we will see in the following years. That is only that. Many of these companies also have people in employment who work, full time, on open-source software, do research and publish academic papers, etc. If ads fund these, by all means, go ahead. His argument can be somewhat justified if the business's ONLY operations surround "making people click ads".

    6. Re:Amen. by RockoTDF · · Score: 3, Insightful

      Could one argue that even if you are working on a google project that has nothing to do with ads, that you are ultimately contributing to a business that exists to get people to click ads? I think that is his point. Yes, the best and brightest aren't directly involved with ad clicking, but their code and equations are.

      --
      There is more to science than physics!

      www.iomalfunction.blogspot.com
    7. Re:Amen. by The+End+Of+Days · · Score: 2, Insightful

      You can make that argument only if you oversimplify everything to the point of uselessness - at which point you can make just about any argument you want if you're clever enough.

    8. Re:Amen. by shutdown+-p+now · · Score: 4, Insightful

      Indeed. As we all well know, the best minds of his generation are thinking about how to do HFT faster than competitors. Which is an even more meaningless (if not downright harmful) thing than making people click ads.

  3. well no shit. by bmo · · Score: 4, Insightful

    Manufacturing is dirty and nasty and you don't ever want to do it. It's for the dummies. It's buggywhips.

    That's what's pounded into the heads of everyone going through school that scores above 100 on IQ. As Mike Rowe said at TED, there's a war on work that's been going on for 40 years.

    --
    BMO

    1. Re:well no shit. by MoonBuggy · · Score: 4, Insightful

      While you may be right about the psychological issues, they are overlaid by more distinctly practical ones. I can start a moderately large website with nothing but good ideas and $100 worth of hosting; a musical prodigy (or a tone-deaf teenager) can be heard by millions of people simply with a webcam, a mic, and a YouTube account.

      If I have a brilliant manufacturing idea I have little choice other than to lay down thousands on machinery and materials, and since I don't have said thousands lying around, that means I need investment, which means aversion to risk, which means killing many of the radical ideas that might really be something special. It's not always the case, and rapid prototyping/on-demand manufacturing is helping, but there are still orders of magnitude between the start-up costs of an 'information' business compared to a physical one (assuming that you've got the skills in the field yourself, rather than needing to buy them in from outside).

      It's why we're seeing billionaires coming from nowhere in the tech field - near-zero barrier to entry means the market decides (for better or worse) fairly directly on the products that survive. In manufacturing, the gatekeepers with the capital have their say long before the consumer does.

  4. consumer products are price constrained by OrangeTide · · Score: 4, Insightful

    Unless you can manufacture the candy and soda efficiently, no amount of marketing is going to save your ass.

    --
    “Common sense is not so common.” — Voltaire
    1. Re:consumer products are price constrained by im_thatoneguy · · Score: 4, Insightful

      I just went to an event yesterday sponsored by Monster Energy. I imagine the profit margins on a $5 can of non-carbonated pop is *at least* 500%.

      There is a *LOT* of room for manufacturing inefficiency in such a product. But the marketing which produced literally thousands of people paying money to wear a hat or sweater emblazoned with your logo is by far the greater accomplishment than the product.

      It's a product that tastes like shit, is grossly over priced and really only exists because of its successful marketing campaign and lifestyle association.

  5. So? Advertising is new? by SmallFurryCreature · · Score: 4, Insightful

    Yes, this guy is in advertising. He is the b-ark but for some reason, he figured it out. Well? Advertising has been around for a long time and has always about getting people to buy more widgets they don't need. There really is no difference between the guy who came up with Soaps to sell soap and the guy who invented the monkey gif ad.

    If this guy hates his job, there are plenty others. It is hardly as if the whole world is just working for facebook.

    If ANYTHING, this guys attitude "my job is just selling ads, therefor the entire world is about selling ads" is the problem. No, the whole world is NOT you. Don't throw a hissy fit because you found out you work in advertising. Oh and the guy in the example? Now runs a data analysis company. Gosh, he was so upset about this job selling advertising he went into data mining. Two guesses what he mines for.

    But there are still countless companies doing real work, just as they have been doing while advertising agencies have been around.

    Just accept, most of us lead utterly meaningless lives. The b-ark better be really big.

    --

    MMO Quests are like orgasms:

    You may solo them, I prefer them in a group.

    1. Re:So? Advertising is new? by geek · · Score: 5, Insightful

      Advertising has alway existed, but it's never existed on this scale. We're seeing a type of advertising now that dwarfs even the insane propoganda put out during rival governments during war time. You can't go anywhere, do anything without ads everywhere. In movies, buses, signs, TV, radio. Hell even my place of employment covers the walls with ads for products because they get kick backs from the vendors. I walk down a hallway every day with coca cola and apple plastered over the walls.

      To say it's always existed is like saying viruses always existed while everyone around you is dying of AIDS. At no other time in history have we been so over come with bullshit. That is the point.

  6. No easy answers by spike_gran · · Score: 5, Insightful

    I think the real question from TFA is if we all do pointless crap like market analysis, marketing, branding, and search engine optimization like the guy in the article, are we going to someday have a future where these skills can no longer be converted into food and shelter through the magic of the market.

    For a while now, I've been wondering what the purpose of the USA economy is.

    There are the basics, of course. I work so that I can have food, water, clothing, shelter, free time, fun. But it is through the magic of the world economy that I get those things by writing software specifications and unit tests. The economy somehow figures out how many lines of code I need to write to buy a loaf of bread or a gallon of milk.

    I suppose I don't worry too much about the fact that most of the work we do is of dubious importantance, so long as it is still convertible into food and shelter. But there is a tipping point somewhere. If everyone in the USA worked making click-through ads, we'd reach a point where no amount of work could be converted to food and shelter.

  7. There is worth while technology coming out of this by i_ate_god · · Score: 5, Insightful

    AI and natural language processing certainly benefit from this, and the technology invented goes beyond just ad placements (even if it's the primary motive).

    Not only that, but innovation has taken place just to handle the sheer volume of data created by the "social web".

    the technology and resources to predict trends is something that has come out of this whole social thing, and since this kind of information can be compiled and analyzed by just about anyone, just about anyone can capitalize on that information in many ways that don't involve specifically targeted web ads.

    --
    I'm god, but it's a bit of a drag really...
  8. Re:What about investment banking? by n8_f · · Score: 4, Insightful

    I think that banking is actually a little more honorable than click ads.

    Really? Because I don't anticipate having to spend hundreds of billions of dollars of our money to bail out Google and Facebook in order to prevent a global catastrophe. And yet, not only have I had to do that once already in my lifetime for the banking industry, I expect to have to do that again because little has changed since the last time we did it. So, fuck the banks. We're lucky that this bubble is in an industry that is not "too big to fail."

  9. The best minds of his generation? by Kanel · · Score: 4, Insightful

    The best minds of my generation are creating bio-tech startups in Bangalore
    The best minds of my generation design oil rigs for the Santos basin offshore Brazil
    The best minds of my generation can't afford education in Nairobi
    The best minds of my generation divert rivers in China to power cities not yet built
    The best minds of my generation uncover the workings of the brain in a town near the pole
    The best minds of my generation overthrew a dictator in Kairo
    The best minds of my generation enrolled in a militia in Afghanistan
    The best minds of my generation does not read businessweek.com

  10. The best minds of every generation are wasted by spasm · · Score: 4, Insightful

    The best minds in the 1860s wasted their lives coming up with new colours of synthetic dyes to allow fabric manufacturers to sell more fabric. The best minds of the 1920s wasted their lives in the new(ish) field of advertising. The best minds of.. The vast majority of the 'best minds' of any generation have ended up taking the stable and well paid jobs associated with working for commercial interests, usually on stuff that won't exactly change the world or make it a better place or anything of the sort. The only thing more depressing is when there's a large war and the best minds of the generation spend years of their lives trying to come up with more efficient ways to kill other human beings. However, in any generation some bright people through accident or design work on things that decades later, in hindsight, are seen to have changed the world in some positive way.

    And sometimes people who do useful things with their lives started off doing something like helping facebook sell ads, and had a sudden realization one day that this was a waste of their life. I hope this guy now goes and has a go at something he thinks will make the world a better place instead of just whining about how facebook is ruining the world.

  11. Re:Disturbing Trend? by khallow · · Score: 3, Insightful

    This is the new America. It's the perfect cesspit for breeding Zuckerbergs.

    Zuckerbergs wouldn't exist in this dystopia. He didn't start with all that wealth and power. He'd merely be another would-be upsurper shutout of capital, subject to onerous, regulatory burden, and whatever other ploys your dystopia has to keep wealth with the wealthy.

    Great wealth only came to him as the result of creating something of value (sure, I think Facebook is overvalued in the markets, but it still has considerable inherent value).