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The Internet's Network Efficiencies Are Destroying the Middle Class
Hugh Pickens DOT Com writes "Joe Nocera writes in an op-ed piece in the NYT that the same network efficiencies that have given companies their great advantages are becoming the instrument of our ruin. In the financial services industry, it led to the financial crisis. In the case of a company like Wal-Mart, the adoption of technology to manage its supply chain at first reaped great benefits, but over time it cost competitors and suppliers hundreds of thousands of jobs, thus gradually impoverishing its own customer base. Jaron Lanier says that the digital economy has done as much as any single thing to hollow out the middle class. Take Kodak and Instagram. At its height, 'Kodak employed more than 140,000 people.' 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.' Networks need a great number of people to participate in them to generate significant value says Lanier but when they have them, only a small number of people get paid. This has the net effect of centralizing wealth and limiting overall economic growth. It is Lanier's radical idea that people should get paid whenever their information is used. He envisions a different kind of digital economy, in which creators of content — whether a blog post or a Facebook photograph — would receive micropayments whenever that content was used. 'If Google and Facebook were smart,' says Lanier, 'they would want to enrich their own customers.' So far, he adds, Silicon Valley has made 'the stupid choice' — to grow their businesses at the expense of their own customers. Lanier's message is that it can't last. And it won't."
The micropayments for content idea sounds familiar.
Kodak was replaced by a whole slew of companies that make components for digital cameras, cell phones, picture hosting, digital frames, etc.
...do we throw our wooden shoes into the Internet?
This guy is a moron.
He's completely ignoring all the new jobs in the last 10-15 years that have been created over the years:
- Build and maintain networks
- Building data centres (construction)
- Network management and services (ISPs, etc...)
- IT support (hundreds of thousands of jobs and probably millions, small consultant companies and mom and pop shops)
- Research has tremendously increase
Seriously, his story is almost the same as "Robotics and Automation" is stealing all our jobs. But then they forgot the support industry for these new technologies.
Things change, its the way of things, people need to adapt and go back to school... or become salesmen :)
Here I thought the financial crisis was caused by lenders approving loans they knew people wouldn't be able to pay off and then packaging those loans together and pawning them off on other people and so on through the pyramid until the entire scheme inevitably collapsed. Nope. It wasn't greed on the part of the bankers and lenders. It was the Internet! Technology is to blame. And do you know who's behind technology? Scientists! Yup, if we'd all go back to being completely ignorant and subservient to the rich folks who tell us what to think then everything would go back to those wonderful days when everyone was happy.
[/sarcasm]
Wait... who put these extra-strength rose colored glasses on my face?
My sci-fi novel, Ghost Thief, is now available from Amazon.com.
Once upon a time 100% percent of GDP was produced by farmers but rising farming efficiency rendered many farmers unnecessary. Once upon a time the vast majority of the middle classes worked in factories but rising efficiency from automation made many redundant. Once upon a time all administrative tasks where written and calculated by hand by vast numbers of office workers. New forms of economy rise whenever efficiency pushes people out of work. But I can't pretend that I'm not a little worried. Any such new form of economic activity will need time and stability to form.
I stopped reading the summary right there - that was one of the dumbest things I've seen claimed in a long, long time.
Maybe network efficiencies caused Hurricane Sandy to hit New York, too...
#DeleteChrome
The billionaires are destroying the middle class, by extracting their wealth; Internet efficiencies are just one means they use to do that. This is, simply put, not inevitable, and if the power structures were different, the Internet would be enriching, not destroying, the middle class.
How to change that, and the end game if it is not changed, are left as exercises for the reader.
Because "divert blame from the upper class" has become a lucrative job with lots of cash coming in.
The reason you could only have black was because at the time of the assembly line's advent, the only 'fast-drying' paint available was black. When GM came along, different colors had been developed to meet the demand. Which Ford also used.
FYI
Common Sense (+1)
That just says there are sectors that are booming. This shift has left a lot of people behind. what you are ignoring is all the lower skill jobs. Now when I say lower skill, I don't mean McDonalds; I mean any job you could do with a 2-4 year non-technical degree and on the job training.
It used to be, you go to college, prove you can read, write, and take training, and you were almost garaunteed a middle class lifestyle supporting job. The entire economy was based around the plethora of these jobs.
My favorite example is the paralegal. They still exist, yes. However, it used to be a single lawyer with a big case would hire an auditorium full of paralegals just to study case law and review documents. Those days are gone, that job is done by a small handful of people. An entire auditorium reduced to maybe 2-4 people.
That is why you are seeing people with college degrees working at McDonalds and those with less education struggle to get even the shit jobs that they used to be considered "stuck with". We have seen the huge rise of part time, low wage employment.
But yes, our sector is booming and it is great. That is partially because we empower everyone else to hire less people, and use the ones they do hire more efficiently.
"I opened my eyes, and everything went dark again"
Unfortunately there's way too much neglect in the industry right now. I drive around the city that I live in and more than half of the pedestals are cracked open, with plastic bags wrapped over the distribution blocks to keep water off of them. The cable and phone companies are neglecting their infrastructure and given the number of years that this has been a problem, they don't seem interested in hiring the staff or paying for the materials to fix these problems correctly.
As far as data centers, network management, and the like, the industry has headed toward ever smaller and more powerful machines, virtualization, and equipment that needs less knowledge to support it. Autoprogramming switches, that sort of thing. It's also becoming more prevalent to outsource instead of having staff on-hand, so that's not exactly helping to push us toward full employment either.
In short, it's all screwed up.
Do not look into laser with remaining eye.
Also because "blame technology for its inherent evil" is the default reaction to technological change of the academic handwringer class from which our journalists and columnists are drawn.
...is that this guy's girlfriend left him for the web developer at his company.
never bring a twinkie to a food fight.
Kodak was fucked over by inept management. At the beggining of the digital switchover, Kodak was actually one of the pioneers and the future was bright. But management thought this new digital thingamajiggies were a fad, so there we are. They could easily be where Canon or Nikon are now, basically owning the professional market, or Sony, owning the sensor market. But, alas, they went the way of Polaroid, instead of going the way of Canon.
The final nail in the coffin came a few years later when their braindead CEO had the brilliant idea to gamble the company's future on... printing! On a day and age where 95% of all photographs taken were already viewed on a screen of some sort, he decided that printing was a fabulous idea. Yeah, that went well.
Anyhoo, I miss Kodak, I still have a freezer full of film, enough to last me a good 10 years before I run out. I only shoot film recreationally now, probably less than 50 rolls a year. But I miss Kodachrome, Tech Pan and Verichrome Pan already, and will miss Portra NC, PlusX and TriX or Double X, which despite being motion picture film stock was widely used around the world by still photographers. Thankfully I have almost 500ft in deep freeze, as well as a shitload of TriX.
I think it is only one of the methods.
We might have finally reached the tipping point where there will be no new sector for all the displaced workers to migrate to.
Agriculture > Industry > Knowledge workers.. each shift seems to have required progressively less workers which is why we now have the Service sector. ie. crap jobs where people are treated like disposal items.
With the price of automation falling and the playing field internationally being so unfair to manual labour in most developed countries.. how can there continue to be a middle class? I don't see it.
Where are displaced people supposed to find jobs now when every industry has become more and more efficient with technology while using less and less people?
This smells distinctly like someone had an idea ("The internet is destroying the middle class!") and then busily started beavering away trying to jam every square peg into that round-hole of conclusion.
Kodak was absolutely NOT destroyed by the internet, not by any way. It was annihilated by digital CAMERAS. It's only with a staggering misunderstanding of recent history and a stunning lack of historical memory that someone could assert that something released in 2010 destroyed a company that was shedding jobs a half-decade before. (15000 jobs cut in 2004 alone).
To suggest that "the internet" led to the financial crisis is simply ignorant; the (most recent) financial crisis had its roots in the subprime-mortgage industry, which (depending on whom you believe, and probably your politics) was a failure of collusive non-regulation, unbridled mercenary greed, the Democrats, the Republicans, or the Illuminati. Only by a complete misunderstanding of the circumstances could one believe that electronic trading (I guess?) might have had something to do with it, but EVEN THEN fund traders don't use the interwebs, they have dedicated lines because even a 0.5 second delay would mean a massive competitive disadvantage.
NETWORKS are allowing companies of any size to compete successfully around firms like Wal-Mart and Target (who themselves destroyed small-town businesses). Networks mean everyone's competing in a flatter environment, informationally - that's a good thing, pretty much per economics 101. (Well, it's not good for the non-competitive; are they a 'protected class' now?)
Joe Nocera, by the way, is a "business" columnist/commentator who has a penchant for taking a reasonable position to silly extremes, so I guess this isn't such a surprise.
-Styopa
- Build and maintain networks
- Building data centres (construction)
- Network management and services (ISPs, etc...)
- IT support (hundreds of thousands of jobs and probably millions, small consultant companies and mom and pop shops)
- Research has tremendously increase
Continued developments in server and infrastructure technology are introducing major efficiency, automation and density improvements that will significantly reduce the need for jobs in all but the last of those points. So you better start looking for the next trend now.
I decided to log-in and repost my answer as non-AC:
In both cases (digital economy/Internet and robotization) the net result is increased productivity and a smaller workforce. It is true that some new jobs are created, but they are fewer than the ones replaced.
The only solution, really, is some sort of socialist system, with higher taxes for the high-earners so that everyone has a fair share of the increased productivity. And with bigger strides in robotization, this will be mandatory, or else we'll have revolts and heads will literally roll, which would be unpleasant.
I'm sick of explaining to the kids that I cannot afford a PS4 for their Christmas because travel costs to work are going up and tax allowances being reduced, at the same time that kids of a single mother who works in Tesco's part time can easily afford it - and then tell us how a charity is giving them a holiday in Benidorm in the summer. I'll be lucky if we can afford a week in Southend-on-sea.
This sounds to me like you have chosen to live in the suburbs, too far from work. It sounds like you could afford a PS4 and more if you did one or more of the following things: Find a job closer to home. (perhaps, Tesco.) Moved house closer to work. Got on the dole , like the Tesco part-timer you facetiously cited.
Partly true - tough my job moved further from me. Moving has a very high fixed cost (stamp duty on buying a new house, estate agents fees, solicitor's fees, and the actual move). With the workplace in a more expensive area moving would probably never save me money, and certainly the payback time would be many years. not to mention kids are settled in school.
You're right though, from a percentage aspect and a total volume aspect, the middle class is providing the greatest tax revenue. The extremely wealthy individual is paying a lower percentage than yourself, but they are also paying many orders of magitude more actual pounds than you ever will. And, lest you forget, the middle class are also the largest consumers of said tax revenue. Roads for you to get from the burbs to work, public transport, police, fire brigade... the middle class majority consume the majority of these services. If you look at it objectively, the current system is "largely" fair.
It doesn't make you feel any better, but it does sound like you are avoiding some very logical decisions that could change your circumstance, but you choose not to.
Though as a group they are the largest beneficiaries individually they are not. The lower paid get many benefits, and you only have to hear about how much some of the ultra-rich get for "set aside land", grants for maintaining their "buildings of historical interest", and schemes like the Duke of Northumbaland's "Alnwick garden charity" that gets grants and lottery money to improve the land - that will revert to his personal ownership after 20 years.
Wealth Inequality in America exposed:
http://www.youtube.com/watch?v=QPKKQnijnsM
This image says it all:
http://upload.wikimedia.org/wikipedia/commons/b/b3/If-us-land-mass-were-distributed-like-us-wealth.png
Also interesting:
http://en.wikipedia.org/wiki/Wealth_inequality_in_the_United_States
If Pandora's box is destined to be opened, *I* want to be the one to open it.
Actually I think if you look at the number of jobs created in those industries, and a realistic picture of the number of jobs they replaced in other industries the numbers are still significantly negative.
Let me use one simple example of the old way, compared to the new way, looking only at jobs in America. 20 years ago a product built in China would be shipped here on a boat. A team of 20 or so long shore man would unload the boat. 200 truck drivers would take the goods to an importers warehouse, employing another 200 to sort them. 5 customs inspectors would go over everything on the boat and make sure it passed muster. Another 200 drivers would set out across America to middle man warehouses. Each of those 200 warehouses would employ another 200 people to unload the trucks, break down boxes, sort, pick, and build new bundles, and send them to mom and pop stores in their area. Each mom and pop store would then employ 10-20 people to stay operating.
The new way is that your iPhone is ordered online by a computer run by a fraction of personafter all a sysadmin these days can take care of a few thousand machines. It is made in China and put on a FedEx plane. A team of 3 pilots brings it to the US. 1 customs inspector spot checks a few things match the computer generated invoice. Perhaps a hundred folks at the FedEx shipping center help sort that package. Another 3 pilots take it to the destination city, where 1 loader puts it on a truck for 1 driver to drop off at your door.
That is supply chain efficiency. No inventory in warehouses, which means no warehouses. No middle men. No or limited retail stores. Handle the package a minimum number of times, don't let it sit around collecting dust and depreciating while tying up capital. It's all driven by computerized supply chain management.
And this doesn't even address the issue that many of our goods are so cheap now as to be disposable, eliminating whole industries of repair. Remember when their used to be TV Repair Shops? Yeah, those all went away when a new TV became $200.
So yes, there are millions of new jobs, but there's also no shortage of information suggesting that workers are more productive with technology, which means one new worker can do the job of more than one old-school worker. That's net negative for the job market. When we were at full employment that was good, freeing up some people to do new things, but now that we're at less than full employment it could quickly become a downward spiral as there are no new jobs, people go unemployed, lose skills, and stop contributing to the economy.
Very true. With companies not "sharing the wealth" and favoring owners over employees in almost every case, this becomes a very real problem since most people are employees first and foremost (often only).
There's plenty to go around, too - our country's GDP is booming. Its just that none of that wealth is being shared. Oddly enough, the pain when a recession comes is shared very quickly.
You're special forces then? That's great! I just love your olympics!
There are many problems, and we aren't going to work them all out on Slashdot :)
One reason that people work at McDonald's with college degrees is that the traditional, elite "liberal arts" education is sold as a job-getter to non-elites. Sure, a wealthy man can find a job for his liberal-arts educated son. Good luck to the liberal-arts educated guy whose dad is a factory worker, or even in prison. For most people in the middle or lower classes, college should be used to develop an actual skill. A liberal-arts education is great, but it is a luxury unless one can be assured that they will attend graduate school.
With the disappearance of factory jobs, we really are leaving our high-school graduates hanging out to dry. Good paying jobs require more skill now, and I think if we want to maintain a non-college track, we should seriously consider extending free pubilc education through associates-level courses.
Massive numbers of factory jobs are gone. Probably forever. We can blame robots, China, or whatever but the reality is that they are gone. We need to be realistic about what the next generation of kids needs to have a shot at a middle class lifestyle.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
Completely agree: the economic impact of this shift cannot be overstated. This shift is what's driving the hollowing out of the middle class: all of those white collar, skilled jobs are being wiped out by greater efficiencies. True, it's probably employing a software programmer somewhere, but that is at the expense of thousands of paralegals and even lawyers. The brutal reality is this: the system rewards the small handful of top performers at the expense of thousands of rank and file / competent but mediocre folks underneath them. Society is going to have to figure out what to do with all these people, or there will be hell to pay.
May it's time to change full time to 20-32 hours a week with an say min level of say 100K+COL to have someone on NO OT salary.
Maybe also have forced comp time / any use it or lose it use it or lose vacation policy must pay out the lost time as some people can't get the time off and or comp time goes to vacation but the work load is to high to use it all.
We're getting Wal-Marted to death, and the libertarians want to argue about Kodak.
There's no convincing them. They'll be touting the virtues of the unrestrained free market right through the next depression.
I do worry about what's coming next for the middle class, and that's coming from someone who's firmly in the "knowledge worker" camp. The reality of this is that the traditional "corporate drone" job is rapidly being replaced by software automation or cheaper labor. Futurists who see a bright Star Trek-style utopia at the end of this change, in my opinion, are overlooking some very big problems:
- The loss of safe, stable corporate employment is going to cause a huge shift in people's standard of living. There are millions of people who get up, get in their car, go to an office, take a stack of input work, perform some process on it, forward it to the output queue, and repeat this 5 days a week. I think most IT people can relate -- we support lots of people doing these jobs. All of that is going to disappear. Now you're going to have a chunk of the population who is suddenly unemployed, broke, and has no way to support itself to the same standard. Think about the office environment of the 60s vs. now -- no more secretary, no more typing pool, way fewer bookkeepers, way fewer middle managers. All those workers in the 60s made enough to buy houses, cars, vacations, etc. and keep the economy running. Now most people who want to consume are forced into debt.
- There's no getting around the bell curve. It's impolite to say, but not everyone is or can be a knowledge worker. (I'm no genius either, so I'm not trying to be snobby or elitist.) We've already hollowed out the lower end of the curve by killing manufacturing jobs. Someone with an IQ of 98 is much better suited to performing a repetitive assembly line task with no independent thought. Those people used to be able to work in factories at a wage that at least allowed them a few nice things once in a while. Now, all those people are working minimum wage jobs or unemployed.
- Right now, there is no appetite for ideas like providing everyone a subsidy. Unemployment insurance in the US is a joke and the idea of a universal income will never fly with those who have more than average.
I definitely don't want to go back to a world without computers and automation, but I think we need to seriously consider the problems that complete automation of all routine tasks will create for society in general. The standard answer when anyone brings up concerns is that better, new jobs will get created. What will these be? I can't see a future form of employment that takes the full spectrum of people's abilities into account and makes everyone's lives better. When you can't even fall back on fast food, or driving a taxi, what's next??
Wrong. Flat tax is a bullshit idea that benefits the rich the most. Money's value to an individual is logarithmic, not linear. Taxing a billionaire 10% and a homeless man 10% is NOT fair, and it's simplistic to think it is.
If you want to replace people with "efficiencies" then be prepared for, and learn to live with, a larger welfare state.
You only need so many greeters at Wal-Mart. Only so many domestic workers. Further, there is a limit to how much a domestic worker will be paid. Remember, in the England of "Upstairs/Downstairs" the domestic workers were forced to wear different bonnets to church so they wouldn't be mistaken for proper ladies. Rich people don't want poor people to live as well as they do.
We just might be reaching a point where there just aren't enough new things for people to do to make a living. So, we can either accept that we will have to have a larger, more equitable and robust welfare state, or start being willing to embrace some very ugly solutions like mass population reduction. And except for the most ardent neo-libertarians, people usually aren't comfortable with forced population reductions.
The thing you CAN'T have when people are being put out of work by efficiencies is an expectation that people work longer hours for less pay and higher productivity.
Here we are, in the 21st century, and people are working longer hours. I don't think technology was supposed to result in people working harder, and more people at the bottom. Technology wasn't supposed to result in less economic and social mobility. Technology wasn't supposed to result in a lowering of standards of living and greater economic uncertainty.
You want that increased efficiency? Then be prepared for people working fewer hours for more pay. For two or three people doing jobs that were once done by one person. And for a much stronger social safety net.
You are welcome on my lawn.
I don't really believe we can or should tax our way out of the problem. Taxes can do many things but they are not the be all and end all solution to systemic problems. At some point is it not the case that adding more sumps is not the real answer to the boat taking on water.
The thing is, corporations are government chartered. They recieve limited liability in exchange for meeting certain regulations, without which, they would have trouble existing and operating as they do today.
Corperate structures account for far more of the economy than the government. Simply shuttling money up through them isn't the answer, you need to fix the corperate structures to not require as much central redistribution.
Frankly, I think we need to look at funding models and how to create more independent companies that are not beholden to stock markets and venture capital. Companies built around the idea that profits are part of the means by which we do our job and put food on our tables, not the be all and end all target for their own sake.
To use a simple example. A coffee shop should be opened and chartered to provide the community with excellent coffee and atmosphere for social gathering. Profits keep it in business, and keep the owner and workers able to do it, and able to live and enjoy these things like everyone else. It is entirely backwards to look at providing coffee as a means to profit.
"I opened my eyes, and everything went dark again"
Oh we don't need to look any further than the constant concentration of wealth.
The wealthy want more. Where can they get it? From the greatest consumers of all? No. Those are the poor. Of all the people who are famous for living beyond their means, it is the poor. Mostly, that's why they are poor. So that's not it.
The middle class still believe the harder you work, the better you will be. That's an endless amount of drive. Surely they will continue being middle class even after they become poor. What's killing the middle class? Lack of working opportunities. Where are they going and why? We know these answers. What gets me are all these consumer oriented businesses who can't see they are destroying their customers and when they are gone, where will they turn?
Idiots.
The Kodak reference really hit home for me. My father was an immigrant and came to America with little in the way of marketable skills or education. But he worked at Kodak his whole career and made a good salary. They treated him well and even gave him a pension for all his years of hard work. My aunt - his sister - also worked there. You know what her job was? She stuffed little tins of film into little boxes on an assembly line. Not a very exciting job I'm sure but it afforded her a decent middle class lifestyle.
Those jobs are largely gone today, and with it, the opportunity for many people to reach up and join the middle class. Those of us in IT are fortunate to be on the right side of the digital divide. Not everyone is cut out to be a software engineer or a doctor or a Silicon Valley entrepreneur. Who speaks for them?
It used to be only assembly line jobs that were being replaced by cheap overseas labor. Now it's moving up the chain and we're seeing IT jobs being moved to cheaper markets. We've seen it disrupt the careers of Travel Agents, Real Estate Agents and people that sell cars. I think the medical field is next. It won't be long before your annual checkup is done by a Doctor in India via Skype. All in the name of progress....and profits.
I'm closer to retirement than college now so I don't worry about me. I worry about the younger generation and what kind of world we are leaving for them.
As someone who has worked in the logistics industry now for about 10 years, currently pretty much everything about your post is factually incorrect.
iPhones are shipped via ocean cargoships, they are domestically warehoused, and domestically shipped primarily via truck. I know this because my previous employer handled the supply chain logistics and domestic warehousing/staffing for the iPhone.
Also, look to the trade consortiums and trade lobbies for why there are fewer customs inspectors - not electronic/mechanical efficiencies.
Until planes can carry hundreds of shipping containers worth of goods or the number of air routes is vastly increased ocean shipments are going to be vastly less expensive for all but niche markets - .ie seafood is one current market where a majority of product is air shipped.
Its not the internet's fault, it the economic systems fault, there is nothing wrong with 13 people to replacing 140,000 peoples jobs, I know its not exactly an accurate example, but if it is true its a good thing, isn't it? It is about still providing an environment in which those 140,000 people can live, be happy, and contribute to society. Our current economic system was set up in an environment where we needed to produce more just to get the basics of life. That has changed, now we seem to be producing more for the sake of consuming more.
As we get more an more efficient and it takes less and less people to produce items (e.g. imagine a robot could replace a person) the natural result in our current economic system to concentrate the wealth with fewer people (the robot manufacturer).
We as a society need to rethink our goal as an economy, is our only goal to continually increase GDP, or is it to become a happier, healthier society. After a certain point they are not the same thing. How do we distribute wealth? I don't support just giving people an equal share, people work try hard should be rewarded, but to what level? The entire human race has contributed to the knowledge we now have, not just a few individuals. Is it fair that a few individuals can claim the rewards? I think we will loose a lot if remove the rest of the population from the people who are enabled to create/innovate, because they are reduced to just trying to survive, or don't survive at all.
I don't blame the rich, they are just doing what comes naturally with the system, trying to make themselves richer, after all isn't that what we are told is the definition of success? I think that definition of success is wrong.